Relief to home builders and buyers over rates of goods and services tax (GST) on parking space and other subsidiary services by an authority for advance rulings (AAR) was short-lived, as an appellate authority modified the order of the former.
West Bengal-based AAR had earlier ruled that services such as preferential location charges (PLC), parking space, common area maintenance could be bundled with the main construction services. As such, these services could get one-third concession on the GST rate, technically called the abatement rate.
However, the appellate authority of advance rulings (AAAR) set aside the order to this effect. The AAAR held that transaction mechanics of these services is that the builder charges a separate amount from the buyer for choosing a particular floor or location advantage.
Thus, it ruled that the abatement which is allowed on construction service cannot be extended to these services.
The ruling may trigger fresh debate on the issue, experts said.
“The AAAR’s decision is bound to resurface the debate on taxability of PLC, parking and other charges during construction under GST,” said Harpreet Singh, partner at KPMG.
He said while the final position on this may now take a longer time to settle, until then the homebuyers may need to bear the brunt of increased tax costs.