In a significant ruling, the Madhya Pradesh High Court, while considering a petition challenging the levy of GST on developed land, has directed the Bhopal Development Authority to reconsider the levy in the light of the circular issued by the Ministry of Finance clarifying that no such levy can be made.
The petitioner, Ms. Shraddha Tiwari approached the Court contending that GST at 12% has been levied upon the sale consideration for the purchase of developed land upon the petitioners who happen to be purchasers of the said land from Bhopal Development Authority.
According to the circular dated 03.08.2022 issued by Government of India, Ministry of Finance, Department of Revenue, issuing clarifications regarding applicable GST rates & exemptions on certain services, which stated that “Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST. However, it may be noted that any service provided for development of land like levelling laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services.”
A bench of Justice Sheel Nagu & Justice Prakash Chandra Gupta observed that “In view of the aforesaid clarification issued by the Government of India, Ministry of Finance, Department of Revenue, it would be appropriate that the Bhopal Development Authority applies its mind again on the question as to whether GST deserves to be levied in given facts and circumstances or not.”
Remanding the matter back to the authority, the Court held that “Accordingly, this petition is disposed of with direction to the Bhopal Development Authority to reconsider the question of levy of GST on the sale of developed plots to the petitioners in the light of aforesaid circular dated 03.08.2022 issued by Government of India, Ministry of Finance, Department of Revenue.”
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