Residential Units With Parking And Amenities Attract Lower GST

residential units apartment parking amenities attract renters reduced gst goods & services tax

If you are one out of several individuals who are out there, wanting to buy your dream home, it is worthwhile to consider before you pay Goods & Services Tax (GST) that varies in terms of lower GST for any unit that is reserved for dwelling and higher for other services including charges like PLC (preferential location charge) as well car parking. 

In a recent ruling, the West Bengal Authority for Advance Ruling (AAR-WB) declared that any dwelling unit (2BHK or 3BHK apartment for instance) that forms a part of a residential complex and comes bundled with services and amenities related to preferential location and right to make use of car parking area should be treated as one composite structure. 

The construction service will also be treated as the principal supply. Further, it was also declared that the entire value for the composite supply has to be treated solely for the purpose of taxation as a part of the supply for construction service. This shall definitely bring some sort of relief and respite for one and all home buyers who are often charged heavy of services that they might not be aware of. Here’s a look at the implications of AAR and how does it affect the industry on the whole. 

Earlier, the whole industry was reeling under a cloud of confusion regarding takes applicable towards such ancillary services. Following the rate structure of Pre April, several such builders were in the habit of charging taxes at the full rate of 18 percent for PLC as well as parking and transfer charges when they should have been following the 12 percent rate that is applicable towards construction services. In reality, however, despite lowering the rates, such malpractices continue to prosper. Experts opine that the recent ruling of AAR is more of persuasive in nature than being precedent. In other words, buyers can now make use of the thing in any petitions placed before the jurisdictional officer. Industry experts further added that the ruling should garner positive appreciation of what tends to qualify as the whole of composite supply and thus among all those supplies which are usually made for single price and needs is generally constructed as the principal supply. 

In all probability, the ruling shall bring forth respite to one and all home buyers as now builders would continue to adopt a considerable position to levy lower rates on ancillary charges like that of car parking and PLC. The ruling is undoubtedly one of the rarest in recent times that witnessed the joint agreement of the adjudicating authority, revenue authority and the assessee. 

For instance, the West Bengal Housing Board along with The Peerless General Finance and Investment Company Ltd, Bengal Peerless Housing Development Company has come together to give shape to a residential housing project where it will be supplying construction service to one all recipients for the possession of dwelling units by the end of 2023. The applicant supposedly enjoys abatement and is prescribed for a string of construction service along with preferential location service. These include directional advantage and all services of floor rise. It also went forward to seek the very idea of a composite supply, where construction supply is to be treated as the principal offering. The petition has also brought forward the very concept of mixed and composite supply under the spotlight. 

Now, as per the GST law, a composite supply usually comprises of two or more than two services. Herein, the goods or services or both, in fact, are typically accounted for during the normal course of a builders business. Following the ruling of AAR, one such goods and services will be regarded as the principal service whereas everything else will be taken into consideration as incidental. Thus, Goods and Services Tax for the principal shall be applicable across the entire supply. In a very similar manner, a mixed supply accredits to a slew of several different goods and services, the highest rate being the whole supply for such range of goods and services in tandem. 

Are you looking to buy an apartment from a reputed builder? Are you aware of the recent AAR ruling? Tweet us @BootstrapsBiz #BootstrapBusiness #GST #AAR with your thoughts and experiences.

Official Bootstrap Business Blog Newest Posts From Mike Schiemer Partners And News Outlets