Seller of Plotted Land not Liable to charge GST on Sale if Booking and Agreement follows Release of Roads to Authorities: AAR [Read Order]

The Karnataka Bench of the Authority for Advance Ruling (AAR) has ruled that the seller of the plot is not liable to charge Goods and Services Tax (GST) on the sale of plotted land if booking and agreement follow the release of roads to authorities.

The applicant has sought the advance ruling in respect of the question “Whether the applicant is liable to charge GST if the booking of plot, receipt of consideration and agreement for sale is entered as well as the sale deed is executed after the release certificate, on the following components (Under Section of Central Goods and Services Tax Act/Karnataka Goods and Services Tax Act):

a. Sale of Plot;

b. Basic Infrastructure Development charges; and

c. Other common amenities and facilities charges.”

The applicant stated that the developmental activities undertaken by the assessee consisted of the following steps: –

• Conversion of land into non-agricultural use
• Prepare a plan for development
• Obtains NOC from different authorities
• Applying with sanctioning authorities for plan/layout approval.
• Registration of project under RERA
• Launch the project and receive the application along with application money from prospective buyers.
• Booking of plots and entering into an agreement for sale and collecting advance from customers.
• Carry out the development activities and relinquishment the title of roads, drains, parks etc (along with land) to the local authority.
• Development of basic infrastructure and other common amenities and facilities.
• Verification of development of infrastructure by authorities.
• Release of plots for registration by authorities and registration of plots and collecting balance money.
• Completion of pending other common amenities and facilities and handing over the same to common association/apex body, as the case may be.

The applicant further stated that the sale consideration of the plots includes consideration towards the plot of land, development of basic infrastructure prescribed by authorities in the approved plan as well as cost for providing all other common facilities, amenities and specifications to be provided within the project.

The applicant further expressed its understanding that the sale of land is neither a supply of goods nor a supply of services as per Entry No.5 of the Ill Schedule to Central Goods and Services Tax/Karnataka Goods and Services Tax Act, 2017.

Since the sale of land is neither a supply of goods nor a supply of services, it would not matter whether the land is developed or undeveloped. Both kinds of land would not be a supply of goods or services, the applicant went on to submit.

The applicant further submitted that where booking of plot, agreement of sale and sale deed are entered into after receipt of release certificate from the competent authorities, then the entire consideration would be towards the sale of developed land and hence the entire consideration would not be liable to GST due to Entry No.5 of Ill Schedule to CGST / KGST Act, 2017 and accordingly consideration received towards the plot of land, basic infrastructure development and other common amenities and facilities received after release certificate would not be liable to Goods and Services Tax.

The Authority Bench of Dr M P Ravi Prasad and Kiran Reddy T noted that, as far as consideration towards the plot area is concerned, it is clear that the same is covered under Entry 5 of Schedule Ill, and hence the transaction shall be treated neither as a supply of goods nor a supply of services.

It was thus ruled that “the applicant is not liable to charge GST on sale of the plot 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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