Page 143 - GSTL_16 April 2020_Vol 35_Part 3

2020 ] IN RE : NAGPUR INTEGRATED TOWNSHIP PVT. LTD. 357
(F) After due process of law, the AAR has passed the impugned Order
No. GST-ARA-107/2018-19/B-35, dated 2-4-2019 (Page Nos. 18 to
34 of this appeal). The AAR noted the following facts, which are not
disputed.
(i) The appellant is granted the development rights on the prop-
erty by MADC and also has rights to lease out the flats to the
customers. In pursuance of the same, the appellant constructs
residential apartments and give them on long-term lease ba-
sis to its customers.
(ii) The customers would be paying 10% of the lease premium as
advance and pay the balance amounts in various installments
based on progress on construction and the final 5% will be
paid on obtaining possession.
(iii) The maintenance of the flats would be the responsibility of
the customer.
(G) The AAR goes on to observe that generally lease agreements for
flats would be entered into in respect of finished apartments and the
monthly lease amount would be around 2 to 3% of the property
value, but in this case, lump sum lease amount is received during
construction stage itself, similar to the case of sale of apartments,
where the buyer would make stage-wise payments. Then the AAR
has proceeded to compare the information as to lease value and sale
value of flats in the locality and made certain observations. Further,
the AAR has also observed that normally in Maharashtra, the cost of
maintenance of the flat is borne by the owners, whereas in the in-
stant case, the same is borne by the lessees.
(H) After making the above observations, the AAR has referred to
Schedule II of the CGST Act and comes to a conclusion that in the
subject case, there is a composite supply of works contract for con-
struction of flat, which is intended to be handed over to the buyer,
but the transaction is projected as if it is a lease transaction. The
AAR also observes that the entire consideration would be received
before issue of Completion Certificate for the project, which does
not generally happen in a lease transaction. The AAR also observes
that there is not much difference in the price charged for an outright
sale of similar apartments in the area and the lease premium paya-
ble. Accordingly, the AAR has held that the activity would be in the
nature of “works contract” as defined under Section 2(119) of the
Act and fall under SAC 9954 and attract GST @ 18%. The AAR has
not at all examined the claim of the appellant that the activity is
classifiable under SAC 9972 11 and entitled for exemption. The AAR
has also held that the appellant’s first claim that the activity is not at
all liable to levy of GST being a transaction in immovable property
is also not sustainable.
(I) Aggrieved by the above decision of the AAR, in so far as holding
that the activity is classifiable under Service Accounting Code 9954
and attract 18% GST and not dealing with the appellant’s claim for
classification under SAC 9972 11 and consequent exemption from
payment of GST, the appellant is filing the present appeal before the

GST LAW TIMES  16th April 2020  263