In Order No. MAH/AAAR/DS-RM/ 9 /2022-23-AAAR(GST)- Other charges which are inextricably linked to services by way of construction of residential apartment /dwelling are part of bundled service - Appellate Authority for Advance Ruling (Maharashtra)
Members Dr. D.K. Srinivas (Central Tax) and Rajeev Kumar Mital (State Tax) [30-03-2023]

Read Order: In Re: v. M/s Puranik Builders Limited

Chahat Varma

Mumbai, April 17, 2023: Partly setting aside the MAAR Order, the Appellate Authority for Advance Ruling (AAAR) – Maharashtra  has held that the other charges which are inextricably linked to services by way of construction of residential apartment /dwelling are part of a bundled service with principle service of construction of residential apartment /dwelling.

The rate of tax applicable on such services would be 12% as applicable to the construction service. The other charges that don’t pass the muster of indicators of a bundled service are held as supply of independent services. They are to be taxed as per the respective SAC codes and rate of tax thereon.

MAAR had held that services in respect of other charges are independent of construction services and other charges don’t form part of a composite supply.

The AAAR (Maharashtra) analysed the covenants (contained in the agreement for a sale of flat) in respect of other charges, holding that intention of the contracting parties is of paramount importance, in view of the Supreme Court observations in respect of “dominant intention test”.

The Appellate Authority for Advance Ruling (Maharashtra) held that “it is clear that charges in respect of some services are inextricably linked while other services are independently provided to the customer. The dominant intention test and principles for determination of naturally bundled services point out the independent nature of some of the services.”

Since the appellant had collected 18% of GST on the supply of such services, in respect of services which are allowed as bundled services, it implied an excess collection of tax. The Authority thereby directed the appellant to refund the excess tax collected to the customers.