The Karnataka Authority of Advance Ruling (AAR) has held that concessional rate of tax for constriction of affordable residential apartments applicable only to promoters not sub-contractors.
The applicant, M/s OM Construction Company, engaged in the business of construction of residential apartments as a sub-contractor. The applicant entered into an agreement of memorandum of understanding with M/s KG Foundations Pvt. Ltd., for construction of residential project of affordable housing scheme (low-cost housing) for economically weaker sections, as sub-contractor.
The applicant applied before AAR contenting that they are eligible for concessional rate of tax for constriction of affordable residential apartments by a promoter in a Residential Real Estate Project (RREP) as per Notification No. 11/2017 as amended by Notification No. 30/2018 and further amended by 3/2019.
The Authority observed that as per the said Notification the concessional rate of tax applicable only to the promotor in respect of the construction of affordable residential apartments in a Residential Real Estate Project which commences on 1st April, 2019. The Authority further observed that the applicant is not a promoter but only a sub-contractor.
The Coram of Dr. M. P. Ravi Prasad, Member (State) and Mr. T. Kiran Reddy, Member (Central) has held that the Notification No. 11/2017 as amended by Notification No. 30/2018 is not applicable to the applicant who is one of the sun-contractor to the builder or developer or contractor of affordable housing under PMAY Scheme.
The Authority further held that the concessional rate of 0.75% as entry No. 3(i) of the Notification No. 11/2017 as amended by 3/2019 is not applicable to the applicant as the said entry is applicable only to the promoters, but not to the sub-contractors.
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