A parking space might be regarded as essential by modern apartment buyers, but the West Bengal bench of the Appellate Authority of Advance Rulings (AAAR) has stated that car parking spaces cannot be deemed as a natural element of construction services. Times Now has reported that such parking spaces cannot be claimed automatically as a part of the real estate sale. Worse, for buyers the order might even raise the overall price of apartments that offer car parking as well, since the order stipulated 18% GST on the price of the parking space.
Real estate experts felt that the directive is likely to make parking spaces more expensive.
The AAAR’s order overturns an earlier directive by the Authority for Advance Ruling (AAR) in West Bengal. That order had stated car parking along with swimming pools, clubs and gyms could be bundled as composite elements with the construction services. It meant such services would have attracted 5 or 12% GST.
The direction of the AAAR followed an appeal by Eden Real Estates, a developer firm based in Kolkata.
The authority’s ruling stated, “Supply of services for the right to use of car parking space is a separate supply and not be constructed as a composite supply of construction of residential apartment services. In the instant case, supply of services for the right to use of car parking space would be taxable at 18%.”
Quoting an official of consultant Price Waterhouse Coopers, the report said, “While advance rulings are binding only on the parties in question, in respect of the transaction for which the ruling was sought, quite often tax authorities rely on rulings favourable to the department. If the taxpayer (say, builder) has taken a different approach, it results in litigation. Some builders, thus, may adopt a cautious approach and charge 18% GST in respect of the car parking space.”
AAAR also stated that if the apartments are sold after receiving a completion certificate from municipal bodies, the GST will be payable.
The report stated that the GST component would have been lower – at 12% instead of 18% — if the AAAR had considered the parking space as a supply bundled with the apartment as ruled by the AAR.
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