GST ON GOVERNMENT REDEVELOPMENT: DELHI AAR RULES ON NBCC

GST ON GOVERNMENT REDEVELOPMENT: DELHI AAR RULES ON NBCC

DELHI AUTHORITY FOR ADVANCE RULING
GOODS AND SERVICES TAX

Case Title- M/s NBCC (India) Limited

(GST AAR DELHI)

In Application No: 07/DAAR/2018 dated 30.01.2018

Advance Ruling No. 07/DAAR/2018

Date of Judgment/Order- 5th October 2018

IMPORTANT PARAGRAPHS

Para No. 1. The applicant is a Government of India enterprise and engaged in project management consultancy, real estate development and EPC contracts. It has signed a memorandum of understanding on 25.10.2016 with Ministry of Housing and Urban Affairs (MOHUA), Government of India, wherein MoHUA has appointed the applicant as the executing agency for redevelopment of colonies having “General Pool Residential Accommodation” (in short GPRA) and “Government Pool Office Accommodation” (in short GPOA) at Nauroji Nagar, Sarojini Nagar and Netaji Nagar in Delhi. Under this arrangement, the applicant is required to organise construction of GPRA (i.e. dwelling units), GPOA (i.e. office spaces), commercial space and supporting infrastructure, such as local convenience shopping centre, banquet hall/ community centre, creche, schools, hospital/dispensary, ATM/Banks, parking facilities, parks and play grounds etc. at the specified locations in place of old existing buildings. The applicant is also required to maintain the constructed buildings for thirty years after construction. The transaction between the applicant and MoHUA under the said MOU is not a subject matter before this authority.
Para No. 2. As per the MOU dated 25.10.2016, the estimated cost of abovementioned redevelopment work and maintenance thereof for thirty years is Rs. 24,682 crores which shall be met from free-hold sale of specified commercial built-up area. The sale proceeds of commercial built-up area shall be deposited in an escrow account which shall be managed by Capital Management Committee constituted by MoHUA. Capital Management Committee shall review the status of the escrow account on yearly basis, determine the amount, accrued in excess of 20% of the total cost of the said redevelopment work which is required to be deposited in Consolidated Fund of India. MoHUA will be responsible for allotment/handing over of commercial space to the allottees/shopkeepers/schools after completion of the project. L&DO shall be responsible for relocation and rehabilitation of JJ clusters, if any.
Para No. 3. In terms of the MOU dated 25.10.2016, the applicant has announced sale of commercial super built-up area on behalf of MoHUA through e-auction on MSTC website on 30.05.2017 and 05.12.2017. In the e-auction details given on MSTC website, inviting bid for sale of proposed built-up area in the buildings to be constructed by the applicant as part of re-development work, it is mentioned that the applicant is selling the proposed built-up area on behalf of MoHUA. The terms and conditions of such sale provide that Government of India through nominated officer will sign the agreement to sell and sale deed with the successful bidder.

RULING

Para No. 133. The applicant is covered in the definitions of “Agent” under Section 2(5), “Supplier” under Section 2(105) and “Taxable Person” under Section 2(107) of the CGST Act, 2017 in respect of the said project while providing services on behalf of the Ministry of Housing and Urban Affairs. Hence, they are liable to pay GST under Section 9(1) of the CGST Act, 2017.
Para No. 134. The MoHUA, Government of India, is not exempted from payment of GST on sale of commercial built-up space, as it does not relates to any function entrusted to a municipality under Article 243W of the Constitution. Hence, the exemption under S. No. 4 of Notification No. 12/2017 – Central Tax (Rate) and parallel notifications under SGST and IGST are not admissible. After amendment of S. No. 4 of the said Notification by Notification No. 14/2018- Central Tax (Rate) dated 26.07.2018, only services provided by “governmental authority” are exempted which does not cover the MoHUA. Further, MoHUA, Government of India is not a Municipality under Articles 243P and 243Q of the Constitution. Also, since, such services are being provided to business entities, exemption under S. No. 6 of the said Notification is also not admissible.
Para No. 135. The applicant is liable to pay GST on the services supplied under GST regime i.e. w.e.f 01.07.2017, even if part of the consideration had been received prior to 01.07.2017.
Para No. 136. The applicant is liable to pay GST on the sale of commercial built-up area which is under construction, as the same is a ‘supply of service’ under clause 5(b) of Schedule Il of the CGST Act, 2017.