The sale or right to use a parking lot is not naturally packaged with construction services, according to the West Bengal bench of the Appellate Authority of Advance Ruling (AAAR), supporting an earlier decision.
As a result, it won’t be considered a composite supply and will instead be subject to GST at a higher rate of 18%. Eden Real Estates, which is involved in the building of residential units, appealed the AAAR’s decision.
From April 1, 2019, Non-affordable housing projects without input tax credits (ITC) are liable to 5% GST. The builder has the option to pay GST at the previous rate of 12% with an Input Tax Credit for ongoing projects (like this one), meaning taxes spent on inputs can be offset. The GST duty that would have been payable would have been that of the primary supply of construction, which is lower, had the AAAR considered the transaction relating to the parking lot as a composite supply.
The implication of this decision, according to Anita Rastogi, principal (indirect taxation) at Price Waterhouse India, is that purchasing residences with parking spaces will cost more. Some builders can choose to be cautious and charge 18% GST for parking spaces.
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In this instance, the real estate developer argued that stamp duty was paid on the total consideration and that only flat buyers were granted a parking space. The AAAR bench noted, however, that potential apartment purchasers may or may not choose a parking space when booking their apartments. Therefore, the claim that the right to use an open parking spot is a composite supply that is inevitably linked to building services fails.
| Applicant Name | Eden Real Estates Private Limited |
| GSTIN of the applicant | 19AABCE6856A1ZQ |
| Date | 22.12.2022 |
| Applicant | Mr. Ankit Kanodia, Authorized Advocate |
| West Bengal GST AAAR | Read Order |
