Home builders and buyers will get relief as they will be paying reduced GST rate after factoring abatement for services associated with construction of dwellings, at least in West Bengal.
The state-based Authority for Advance Rulings (AAR) has ruled that services such as preferential location charges (PLC), space for parking, common area maintenance services could be bundled with the main construction services.
Before the recent changes, builders attracted 18 per cent GST for their services. However, the effective tax rate came down to 12 per cent. Many builders are charging 18 per cent GST on ancillary services.
Explaining the case, Harpreet Singh, partner at KPMG, said Bengal Peerless Housing Development Company approached the AAR, saying that it bundles the PLC services, right to use car parking space and common area maintenance services with the principal services of construction.
The revenue department too agreed with the submissions of the applicant and echoed a similar view that the overall activity should qualify as a composite supply with the construction service being the principal supply.
The AAR held that it was reasonable to conclude that services provided by the applicant are naturally bundled and offered in conjunction with one another in the ordinary course of business and the other services of the bundle are ancillary to the supply of construction service.