Parking is not a bundle with your apartment. It's 18% GST, not 8%.

Eden Real Estates and the 18% GST on Car Parking: A Separate Supply, Not a Bundle

Eden Real Estates Private Limited builds and sells apartments in Kolkata. They also sell car parking spaces. The company wanted to know: should the parking charge be taxed at the same low rate as the apartment, or at the full 18% GST? The answer, from the West Bengal Authority for Advance Ruling (GST), was clear and costly. Car parking is a separate supply. It attracts 18% GST, whether the apartment is sold before or after the completion certificate. The ruling, dated 22 December 2022, has immediate implications for every real estate developer in India.

What the developer asked

Eden Real Estates was developing a project called 'Eden City Mahestalla' in Kolkata. They offered buyers an optional car parking space for an additional charge. The company moved an application under Section 97 of the CGST Act, 2017, seeking an advance ruling on four questions. First, whether the right to use a car parking space is a composite supply with construction services under Section 2(30) of the CGST Act. Second, if it is a separate supply, what is the applicable GST rate. Third, whether the parking charge escapes GST entirely when the apartment is sold after receiving a completion certificate. Fourth, whether the parking charge remains taxable when the parking space is provided after the apartment handover, post-completion certificate.

The stakes were significant. If the parking charge was a composite supply with construction, it would be taxed at the concessional rate under Notification 11/2017-CT(Rate), with a 1/3rd abatement for land value. That would mean an effective GST rate of around 8% on the parking charge. If it was a separate supply, the full 18% would apply. For a developer selling hundreds of parking spaces, the difference runs into crores.

What the developer argued

Eden Real Estates relied on a previous ruling of the same Authority: M/s. Bengal Peerless Housing Development Company Ltd (2019-TIOL-137-AAR-GST). In that case, the West Bengal Authority for Advance Ruling had held that services relating to preferential location, right to use car parking space, and common area facilities constitute a composite supply with construction services. The developer argued that its own case was identical. The parking charge, they said, was naturally bundled with the apartment sale. It was not optional in any meaningful sense — every apartment buyer needed a parking space. The consideration was collected as part of the overall transaction. Therefore, the same concessional rate should apply.

What the Authority found

The Authority, comprising Brajesh Kumar Singh and Joyjit Banik, examined the facts closely. They noted that the car parking space was optional for buyers. A separate consideration was charged. It could be availed even after the completion certificate was issued. Unallotted spaces were offered to those desiring additional parking. These features, the Authority held, showed that the supply of the right to use car parking space was not naturally bundled with construction services. It was a distinct supply under Section 7 of the CGST Act.

The Authority then turned to the Bengal Peerless ruling. They distinguished it. In that case, the Authority had found that the parking charges were part of a composite supply. But here, the facts were different. More importantly, the Authority noted that the Appellate Authority for Advance Ruling (WBAAAR) had modified the Bengal Peerless ruling in M/s. Bengal Peerless Housing Development Company Ltd (Appellate) (2019-TIOL-68-AAAR-GST). The WBAAAR had held that the abatement prescribed for construction services under Notification 11/2017-CTR is NOT applicable on the value of preferential location service or right to use of car parking space. These are separate services having no association with land. The Authority followed this appellate ruling.

The test the Authority applied

The core of the ruling is the interpretation of "composite supply" under Section 2(30) of the CGST Act. The provision defines composite supply as a supply consisting of two or more taxable supplies which are "naturally bundled" and supplied in conjunction with each other in the ordinary course of business, one of which is the principal supply. The Authority applied a four-factor test to determine whether car parking was naturally bundled with construction:

• Optionality: Was the parking space mandatory for every apartment buyer? No. It was optional.
• Separate consideration: Was a distinct charge levied for parking? Yes.
• Timing: Could the parking be availed after the completion certificate? Yes.
• Availability to non-buyers: Were unallotted spaces offered to others? Yes.

On each factor, the parking supply failed the test. It was not naturally bundled. It was a separate supply of service, classifiable under a different heading (not Heading 9954 for construction services). The rate: 18% GST.

What happens after the completion certificate?

The developer's third and fourth questions raised a clever argument. Under Schedule III of the CGST Act, the sale of a building after the completion certificate is not a supply of goods or services. It is outside GST. If the apartment sale itself is exempt, the developer argued, the parking charge should also be exempt. The Authority rejected this. The supply of the right to use car parking space, they held, is a separate supply of service. It is not part of the sale of the building. It remains taxable at 18% GST, regardless of when the apartment is sold or when the parking space is provided.

THE PLAY: If you charge separately for car parking, treat it as a distinct supply of service at 18% GST. Do not bundle it with construction for concessional rates. And do not assume it becomes exempt when the apartment is sold post-completion certificate.

Why this matters in practice

For real estate developers, this ruling closes a significant loophole. Many developers had been treating parking charges as part of the composite supply of construction, paying GST at the effective rate of 8% (after 1/3rd land abatement). The Authority has now made it clear: that treatment is wrong. Parking is a separate supply. The full 18% applies. The ruling also clarifies that the 1/3rd land abatement does not apply to parking charges, even if they were somehow bundled with construction. The obiter dicta in the ruling notes that the WBAAAR in Bengal Peerless had already held that land abatement is not available for parking services, as they have no association with land.

The ruling also signals that the GST Council's clarifications on preferential location charges for long-term land leases (Circular No. 177/09/2022-TRU) cannot be extended to construction projects. The Authority explicitly distinguished that circular as inapplicable. Developers cannot rely on analogies from the land lease regime to argue for bundling in the construction regime.

For advocates advising real estate clients, the takeaway is straightforward. Review your client's billing practices. If parking charges are being collected separately and taxed at the concessional rate, a reassessment is needed. The risk of a demand notice, with interest and penalty, is real. The Authority's ruling is binding on the applicant and, while not a binding precedent on other authorities, it reflects the current thinking of the West Bengal AAR. Other states may follow.

The bottom line

Car parking is a separate supply of service, taxable at 18% GST, in all scenarios — whether sold with an under-construction apartment, after the completion certificate, or post-handover. Treat it as such, or face the consequences.