Nowadays, builders are facing problem regarding taxability of parking space they are offering in the building premises / residential projects. With separate consideration, some buyer buys the right to use parking space along with the purchase of their apartments and some afterwards, due to which it is getting difficult for the builders to under its taxability and rate applicable.
Mostly the question arises regarding whether the right to use parking space is to be consider as composite supply or not when purchased along with apartment / property.
As per section 2(30) of the GST Act, “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
It has been cleared by the builders that the prospective buyers of a flat / apartment / property in the residential project are offered to avail right to use of car parking space for separate consideration, it is at the choice of the buyers whether they would avail the facility or not. Further, an owner of a flat may also avail this facility even after the issuance of completion certificate of the project or after purchasing the property. If there remains any un-allotted car parking space after allocation among the intending buyers, it is offered to residential applicants desiring additional car parking space. Such supply when altogether studied with section 7 of the CGST Act, 2017 along with Schedule II will be considered as a separate supply of service and cannot be treated as naturally bundled with the construction services, therefore, cannot be called as “composite supply”. Thus, supply of services for right to use of car parking space would be taxable @ 18%.
It doesn’t matter whether the apartments are sold before or after receipt of completion certificate from the competent authority, since right to use parking space is a separate supply of service, therefore will be taxable in either case.
The same scenario has been clarified by the Authority for Advance Ruling in West Bengal in Advance Ruling Case No. WBAAR 22 of 2022, dated – 22.12.2022.
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