May 20, 2023: The West Bengal Bench of the Appellate Authority of Advance Rulings (AAAR), upholding an earlier ruling, has stated that the sale or right to use a car park is not naturally bundled with construction services, according to a TOI report. Therefore, it would not be considered a composite supply and a Goods and Services Tax (GST) at the higher rate of 18% will be levied. The ruling by the AAAR Bench was in response to an appeal by Eden Real Estates, a developer engaged in residential apartments.
GST of 5% is levied on non-affordable housing projects without input tax credit (ITC), effective April 1, 2019. For ongoing projects, the developer can pay GST at the earlier rate of 12% with ITC, implying that taxes paid on inputs can be set off.
If the AAAR had considered the transaction related to the car park as a composite supply, the applicable GST charges would be that of the primary supply of construction, which is lower. The move is expected to make home purchases with parking spaces costlier.
In this case, the developer submitted that the car parking space is only provided to flat buyers and stamp duty is payable on the entire consideration. However, according to the AAAR Bench, prospective buyers may or may not choose a car parking space when booking flats. Therefore, the claim that the right to use open parking space is naturally bundled with construction services, and is a composite supply, fails.
See also: GST on real estate, flat purchase
Harini is a content management professional with over 12 years of experience. She has contributed articles for various domains, including real estate, finance, health and travel insurance and e-governance. She has in-depth experience in writing well-researched articles on property trends, infrastructure, taxation, real estate projects and related topics. A Bachelor of Science with Honours in Physics, Harini prefers reading motivational books and keeping abreast of the latest developments in the real estate sector.
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