GST payable on Sale of Developed Land, as it covered under ‘Construction Services’: AAAR [Read Order]

In the case of Bhopal Smart City Development Corporation Limited (BSCDCL), the Madhya Pradesh Appellate Authority for Advance Ruling (AAAR) held that GST is payable on the sale of developed land as it is covered under ‘Construction Service’.

Shri Atul Shrivastavaon on behalf of the appellant and Shri S. Krishnanon on behalf of Bhopal Smart City Development Corporation Limited, the respondent.

The AAR, vide its order No. 16/2021 dated 22.11.2021 has observed that undertaking development activities does not constitute a supply within the meaning of Section 7 of the GST Laws, and therefore GST was not applicable on such sale, subject to the conditions mentioned in the order of the AAR.

The appellant challenged the order of the AAR mainly on the grounds that the sale of developed land by M/S Bhopal Smart City Development Corporation Limited(BSCDCL)was altogether a different transaction where the monetary value of the facilities provided like water, road, electricity supply line, drainage line etc are included in the value of Developed Land but this aspect has not deliberated by the AAR. The appellant argued that this transaction falls under entry No. 5 (b) of Schedule Il of the CGST Act 2017 and it attracts GST under “construction services”.

The respondent contended that there was no sale of land, but there was the sale of land along with development work and the development work was a separate project, apart from land

It was observed that the activity of the sale of developed land is covered under ‘construction of a complex intended for sale to a buyer and thus fall under ‘construction services’ and GST payable on the sale of such developed land in terms of CGST Act / Rules and relevant Notification issued from time to time.

The bench comprising Shri Navneet Goel, Member, and Shri Lokesh Kumar Jatav, Member held that “the activity of purchase or allotment of land and selling the said land after undertaking development activities of providing amenities such as Drainage line, water line, electricity line, land leveling and common facilities viz. road and street light, etc. is liable to GST.”

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