Kolkata Buyers to Face 18% GST on Open Car Parks

 

In a recent ruling, the West Bengal bench of the Appellate Authority of Advance Rulings (AAAR) in Kolkata has upheld that open car parking cannot be considered a composite construction service and will be subject to an 18% Goods and Services Tax (GST). The authority’s decision confirms its earlier ruling, emphasizing that the sale or right to use a car park is not inherently bundled with construction services.

 

Separate Supply of Car Parking Services

The AAAR stated that the provision of services for the right to use a car parking space should be treated as a distinct supply and not categorized as a composite supply related to the construction of residential apartments. Consequently, the supply of services for the right-to-use car parking will be taxable at a rate of 18%, as per the AAAR’s order.

 

Tax Liability and Timing of Sales

The authority also clarified that the tax on the supply of services for the right to use car parking spaces is applicable if the apartments are sold after receiving the completion certificate from the competent authority. Even if a customer did not initially opt for a car parking space at the time of purchasing an under-constructed unit but subsequently requested one after receiving the completion certificate, the tax would still be payable for the right to use the car parking services, according to a previous order by the bench.

 

Implications for Builders and Taxpayers

While advance rulings are legally binding only on the parties involved in the specific transactions, tax authorities often rely on such rulings that favour the department. Therefore, to avoid potential litigation, some builders may adopt a cautious approach and charge 18% GST on car parking spaces, a senior official at a renowned Financial Advisory Services company noted.

 

Contrasting Rulings and GST Rates

The Authority for Advance Ruling (AAR) in West Bengal had previously held that services like car parking, swimming pools, clubs, and gymnasiums could be treated as composite construction services and attract either 12% or 5% GST. However, this ruling has now been overturned by the Appellate Authority, affirming the higher 18% GST rate for open car parking spaces in Kolkata.

 

This decision has significant implications for the real estate sector in Kolkata, particularly in relation to the GST liabilities associated with parking spaces and the clarity it provides on the classification of such services.

 

Source: timesproperty