QUESTION

If contractor provide services of construction of bungalows (Only labour contract and not the works contract) (more than one Bungalows i.e. 12) to developer then exemption under Sr. No. 11 of Notification No. 12/2017 - Central Tax (Rate) Dt. 28th June, 2017 i.e. services by way of pure labour contracts of construction of original works pertaining to a Single Resident Unit otherwise than as a part of residential complex avaible to contractor?

ANSWER

Facts of the case:Developer gets service of pure labour contract for 12 residential bungalows from a single contractor.

Law Applicable:
 As per entry no. 11 of notification 12/2017 CT(R) the following shall be exempt;

"Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex."

Interpretation: Any service of pure labour contracts pertaining to original works of a single residential unit shall be exempted from GST. A single residential unit shall be otherwise than part of a residential complex.
The intent of the law here is to tax the labour contracts of residential complexes and societies and to exempt the labour contracts which are undertaken at an individual level for construction of their residential homes.
12 bungalows may or may not be forming a part of a residential complex.

To illustrate- If 12 bungalows are sharing a common wall or are located opposite to each other so as to form a "group" of houses located together can be intended to be a society/residential complex. However 12 bungalows when situated miles apart from each other can not be intended at a residential complex.

Whether 12 bungalows in your case form a "residential complex" is purely a question of fact. To give a better understanding of exemption notification following must be considered:

Case 1: If 12 bunglows are situated together and intended to be sold to different people - This is a residential complex and exemption can not be availed.

Case 2: If 12 bunglows are situated together and intended to be sold to 1 person only for his residence - This is a single residential unit belonging to one person and exemption can be availed.

Case 3: If 12 bunglows are situated miles apart from each other and intended to be sold to different people - These are different single residential units belonging to different people and exemption notification can be availed.

Conclusion: This is a question of law. To check whether you can avail the exemption just carefully check whether the intention of the law is defeated or not (as illustrated above).(Reply dt.21-05-2020)