The Karnataka Bench of the Authority for Advance Ruling (AAR) has ruled that the seller of a plot is not liable to charge Goods and Services Tax (GST) on infrastructure development charges if the booking and agreement follows the release of roads to authorities.
The applicant had sought advance ruling in respect of the question “whether c) The applicant is liable to charge GST on Other common amenities and facilities charges if the booking of plot, receipt of consideration and agreement for sale is entered as well as sale deed is executed after the release certificate.”
The applicant relied on the decision of the advance ruling No.KAR ADRG 31/2022 dated 08-09-22 in the case of M/ s. Rabia Khanum where the advance received towards sale of plot is not liable to GST. In the said case, the authority has relied on clarification issued in Circular No. 177 /09/2022 TRU dated 03-08-2022.
Therefore, the applicant was of the understanding that in case of advance received towards sale of plot as well as basic infrastructure development and other common amenities and facilities charges before the
release certificate is not liable to GST.
The Authority Bench noted that, “As far as the consideration separately shown to have been collected towards basic infrastructure charges, it is seen that the same are done to provide the basic infrastructure facilities like electricity access up to the plot, water and sewerage access up to the plot and roads, etc. These are mandatory requirement for release of plots and the plots become the saleable plots only after the provision of these basic infrastructure and facilities.”
It was thus noted by the bench of Dr. M P Ravi Prasad and Kiran Reddy T that, “Hence they are a part and parcel of the consideration for the plot though collected and shown separately. These facilities created are to be handed over to the local authorities and no longer remain part of the applicant’s property.”
It was thus clarified that, the consideration collected towards basic infrastructure development is part of the consideration towards the plot and is not a consideration for a separate supply.
Further, clause (119) of Section 2 of the CGST Act, 2017 defines the works contract as to mean a contract for construction of any immovable property wherein transfer of property in goods is involved in the execution of such contract. In the pertinent situation, the construction of immovable property is present but there is no transfer of property in goods from the applicant to the plot owners.
In conclusion, the bench observed that these constructions are done on the land not transferred to the plot owners but remains in the ownership of the applicant till it is relinquished to the local authorities. Hence the amount collected on account of this only increases the value of the land (plot) and hence do not form a separate supply.
It was thus ruled that, “the applicant is not liable to charge GST on Basic Infrastructure Development charges if the booking of plot, receipt of consideration and agreement for sale is entered as well as sale deed is executed after the release certificate.”
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