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The sale or right to use a parking lot is not inherently packaged with construction services, according to a ruling confirmed by the West Bengal Appellate Authority of Advance Rulings (AAR).

As a result, it won't be considered a composite supply and would be subject to higher GST rates of 18%. The AAAR's decision came in as an appeal by Eden Real Estates, which is involved in the building of residential apartments.

From April 1, 2019 GST levied by 5% on non-affordable housing projects without input tax credit (ITC). For the ongoing projects (as in this case), the builder has the option to pay GST at the old rate of 12% with ITC, which means taxes paid on inputs can be set off. Had the AAAR treated the transaction relating to the car park as the composite supply, the GST levy that would have been applicable would be that of primary supply of construction, which is lower.

The implication of this decision, according to Anita Rastogi, Principal (indirect taxation) at Price Warehouse India, is that purchasing residences with parking spaces will be more expensive. "Some builders may adopt a cautious approach and charge 18% GST with respect to car parking spaces".

In this case, the real estate developer submitted that the car parking space is only given to flat buyers and stamp duty is paid on the entire consideration. However, the AAAR Bench observed that prospective flat buyers may or may not opt for a car parking space when booking their flat. Therefore, the claim that the right to use an open parking spot is naturally bundled with construction services and is a composite supply fails.