Potential interpretation issues " What is metro/ non-Metro for Promoters or developers"

Builders or Promoters developing a residential apartments around greater metropolitan area always come across this dilemma whether the project site is to be construed as Metropolitan or not. The significance of this classification is that as per as per Notification No. 11/2017 - Central Tax (rate), dated 28-6-2017, as amended by Notification 3/2019 CT (Rate), affordable units are taxed on 1% and non-affordable units at 5% ( effective tax rates).  

The operational definition of what is "affordable" varies for Metro and non-metro area as below:

• For Metro : Project with carpet area not exceeding 60 square meters and value not exceeding Rs. 45 Lakhs, be considered an Affordable Residential Apartment
• For Non-metro: Project with carpet area not exceeding 90 square meters and value not exceeding Rs. 45 Lakhs, be considered an Affordable Residential Apartment

Thus, if you wrongly identify the project site as non-metro, chances are there you might end up paying more GST later on during department assessment.

Section 2 of CGST Act 2017 doesn't define the term "Metropolitan", we have to resort to Notification 3/2019 CT (Rate) where its clarified as below:

" Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida. Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with their respective geographical limits prescribed by an order issued by the Central or State Government in this regard"

For all practical purposes, identifying this geographical limits to ascertain whether a particular project site is metro area or not, is not an easy task.  

In the case of VGK Property Developers Private Ltd( refer No.- TN/34/AAR/2022) , The Authority for Advance Ruling, Tamilnadu received an application in this context. The project site is not a Metropolitan area, the said location is governed by various authorities such as below:

(i) Location of the Impugned Project: Plot no: 10, New No;37, Berahcah Nagar, Rajakilpakkam, Pincode 600073

(ii) Office of the Municipality issuing planning permit and collects Property Tax: Sembakkam Municipality

(iii) Office of the sub-registrar: Sub-registrar of Selaiyur

(iv) Office of TNEB: Chennai South

(v) Jurisdictional Revenue Department:-

Circle- Tambaram

Revenue village- Rajakilpakkam

District- Kanchipuram

The ruling was sought, whether the authority who collects the property tax, in this case Sembakkam Municipality ( which is not Chennai Corporation), can be taken as a basis to conclude that the project location is Metro area or not.

AAR upon reviewing the submissions, shared the following key aspects in this regard:

• The Census Commission of India defines Metropolitan cities as those Indian cities having a population of more than 4 million. The 74th Amendment to the Indian Constitution defines a metropolitan area as An area having a population of 10 Lakh or 1 Million or more, comprised in one or more districts and consisting of two or more Municipalities or Panchayats or other contiguous areas, specified by the Governor by public notification to be a Metropolitan area. The Metropolitan city is, therefore by inference, defined by the metropolitan area, and whose land use and development etc., are regulated by the Metropolitan Development Authority
• The Chennai Metropolitan Development (CMDA) administers the Chennai Metropolitan Region, spread over an area of 1.189 km2 (459 sq mi) and covers the districts of Chennai, Thiruvallur, Chengalpattu and Kancheepuram. The applicant has got his unapproved vacant housing plots approved by the Sembakkam Municipality by collecting necessary fees. Regularisation of Plot is of two stages. In the first stage, the layout is to be regularised by CMDA/LPA/Regional Deputy Directors, of Town and Country Planning Department concerned who will examine and issue an in-principle approved layout framework plan to the concerned local body. In the second stage, the local body concerned will issue regularization order and regularization plan for the plot as per the in-principle approved layout framework plan after confirming the ownership of the plot and collection of the balance regularization charge including other applicable charges.
• From the above, it is evident for any development of any land or building, the planning authority shall levy charges (called the development charges) as per the rates prescribed in the Act. The Chennai Metropolitan Development Authority (CMDA) is authorised to regulate real estate development within the Chennai Metropolitan Area (CMA) via the issue of Planning Permissions (PP) issued under Section 49 of the 1971 Tamil Nadu Town and Country Planning Act. Also, from the documents submitted by the applicant, it is inferred that though the Sembakkam Municipality is the 'appropriate local body' for issuing approval order for the building plan, necessary fees towards 'development charges' were collected by the Chennai Metropolitan Development Authority (CMDA). Therefore, the planning authority for the impugned project is CMDA and by extension, the impugned project falls within the ambit of Metropolitan City of Chennai.

This clarification for sure set the perspective very clear as to how to draw a conclusion on geographical area governed by any Metropolitan city corporation. This ruling may certainly throw surprises for many builders or promoters who have otherwise carried away based on local body authorities when that happens to be municipality or panchayats but still governed by Metropolitan corporation.

- LDR