Page 145 - GSTL_16 April 2020_Vol 35_Part 3

2020 ] IN RE : NAGPUR INTEGRATED TOWNSHIP PVT. LTD. 359
(c) The maintenance of the flats would be responsibility of the custom-
ers.
40. The AAR held that this is a composite supply of Works Contract for
consideration of flats which is intended to be handed over to the buyer and the
transaction is projected as if it is a lease transaction. The AAR based its ruling on
the following arguments :-
(A) Generally flats taken on lease are fully constructed flats with Occu-
pancy Certificate which is not the case herein. In the present case,
the lease amount are received during construction. The Lessee
keeps paying instalments on completion of slabs and this type of
payment is only made when person has entered into an agreement
for purchase of flat in an ongoing project.
(B) The AAR called for details of lease amount charged to the custom-
ers towards the leasing of the flats in the proposed project. From the
details submitted by the appellant, the AAR gave a finding that the
lease amount payment over a certain time period is around 50% of
the prices for right to move in flats. In respect of certain flats it was
found that lease amount payment over a certain time period with-
out having possession of the flats is an excess of 60% of the flat. This
lease amount are going to be paid without using the flat and there-
fore it was concluded that the said transaction are given a colour of
a lease transaction.
(C) The Lessee have to pay the maintenance charges. Normally in lease
transaction it is the flat owner who pay maintenance charges.
41. In view of the above, the AAR has concluded that the said supply is
a taxable supply in the form of construction of complex/building/civil structure
or a part thereof including a complexes or buildings for which consideration is
received by the appellant in installments and therefore it is a composite supply of
Works Contract covered u/s. 2(119) of the CGST Act, 2017.
42. We agree with the findings of the AAR. Though the appellant in the
draft agreement has projected the said transaction as a lease transaction of resi-
dential unit in an apartment/building and has also drafted agreement in such a
way to project it as a lease transaction, the said transaction cannot be a lease
transaction but it is an agreement for construction of residential flats. We say so
because the clauses in the agreement though purported to be a lease agreement
as clauses which are in complete disharmony with a normal lease transaction.
The following issues immediately come into mind while reading the agreement
placed by the appellant. Under the CGST Act, what is exempted from tax is ser-
vices by way of renting of residential dwelling for used as residence. Therefore,
when a flat/apartment is given on lease it is always a complete unit which is
immediately handed over to the Lessee for use. The appellant has argued that the
transaction purported to be undertaken by him will come within the purview of
renting of residential dwelling for used as residence. However, in the present
case, the agreement has taken place during the construction of the project and the
lease payments are made slab-wise before the completion of the project. This al-
most never happens in the lease of a flat or a unit.
43. The appellant has got the land on a long-term lease from MADC,
where in the developments happening out of the agreement have to abide by the
basic tenets of the agreement with MADC. Thus the residential flats being
GST LAW TIMES  16th April 2020  265