The Central Board of Indirect Taxes & Customs (CBIC), quoting the GST council’s suggestions, has ‘regularised’ past show cause notices for tax demand issued to foreign airlines. It furnished a circular for the GST applicability of Preferential Location Charges (PLC) for residential or commercial properties.
The board on the concepts of ‘as is’ and ‘as is where is’ basis has come out with a detailed clarification. Based on the GST council’s suggestions it shall be applied to regularise the tax demand for the short tax payment or no tax payment.
“On recommendations of the 54th GST Council, the payment of GST on import of services by an establishment of a foreign airlines company from a related person or any of its establishments outside India, when made without consideration, is hereby regularised for the period from July 1, 2017, to October 9, 2024, on ‘as is where is’ basis,” a CBIC circular stated.
The problem became contentious this year with the DGGI (Director General of GST Investigation) issuing show-cause notices before 10 major foreign airlines with a demand of Rs 10,000 crore. It even mentioned earlier that these services would not levied w.e.f October 10.
The same circular based on the suggestions of the council has furnished relief before the homebuyers who wished to secure flats with preferred locations like facing swimming poor or cornered ones.
As additional services ‘Preferential Location Charges’ will not be considered however as part of construction services. It directed that no separate GST rate i.e. 18% for these. It likely entitles that GST for the whole service along with PLC shall be 1% (affordable housing), 5 per cent (non-affordable), or 12 per cent (commercial construction).
It is to be marked that one-third of the transaction value of an immovable property is attributed to land, which is not included in the GST computation.
The GST council’s suggestion has complied with this circular which is clubbed location charges or PLC with the consideration for the construction services and known as composite supply.
A composite supply is directed to two or more goods or services that are sold together as a set and cannot be sold separately. This supply contains principal supply which is a primary product or service that the buyer is asking for.
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The subjected rate to the principal supply shall be applicable before the whole supply. For the same case, the main supply is construction service and the PLC is bundled intrinsically with it. Consequently, the PLC shall obtain the identical tax treatment as the main supply which is the construction service.
Concepts of ‘As is’ and ‘As is, Where is’
The other circular mentioned that in matters where it has been regularised on an ‘As is’ and ‘As is, where is’ basis, two principles will be followed. If the dispute is higher and lower rate then the payment at the lower rate would be regarded as tax wholly paid for the duration that is regularised. It directed no need to file the difference between the higher and lower rates. If the payment was incurred at a higher rate, no refund shall be incurred.
