Other Services not part of Composite supply with Main Construction Service, chargeable to GST @18 percent

The Maharashtra Authority for Advance Ruling (MAAR) has determined that charges like water connection fees, club house maintenance, and municipal taxes are not part of the main construction service for GST purposes. The ruling stated that these 'other charges' are for independent services and cannot be considered a composite supply with the main construction activity. Therefore, they are taxable separately at an 18% GST rate.

In M/s Puranik Builders Pvt. Ltd. [Order No. GST-ARA-68/2019-20/B-52 dated August 27, 2021], M/s Puranik Builders Pvt. Ltd ("the Applicant") has sought clarification on the issue of whether the charges other than that of consideration of main construction activity - like water connection charges, club house maintenance charges, share of municipal taxes, infrastructure charges, club house charges etc. ("the other charges") are to be treated as consideration for construction services of the Company and classified along with the main residential construction services of the Company or whether it would be treated as consideration for independent services of the respective head. Consequently, what will be the applicable effective rate of Goods and Services Tax ("GST") on services underlying the Other Charges.

The Hon’ble Maharashtra Authority for Advance Ruling ("MAAR") noted that when the question arose to pay stamp duty, the Applicant did not treat these Other Charges as part of main supply, however when it came to payment of GST, the Applicant contended those other charges to be a part and parcel of main construction service. The party cannot be permitted to shift stands as per their convenience.

Observed, the "Other Charges" are different from the service of construction of residential flats. It cannot be said to be naturally bundled and supplied in conjunction with each other. The amount and consideration is separately for different services. Therefore, the Other Charges are not covered under "Composite Supply of Services".

Further observed, the Other Charges are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries in Notification No.11/2017 CT (R) dated June 28, 2017 ("Services Rate Notification") as they are covered under services, other than construction services.