Kar AAR: No GST on plots sold with basic infra

The Karnataka Authority for Advance Rulings (AAR) has ruled that authorities cannot charge GST on taxpayers for selling land plots having basic infrastructure. These include land levelling and installation of sewage lines which are necessities.

The GST law has kept land out of its scope with a mention at point 5 of Schedule III of the CGST Act. Yet, many are contending in open litigations that when land is sold with basic development, such sellers must pay GST.

In line with the outcome of the 47th GST Council meeting, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular 177 on 3rd August, putting all confusion to rest. Land after levelling or laying of water or drainage or electricity lines continues to be “land” as per the Schedule III of the CGST Act. Hence, when these developed land plots are sold, they are considered in the nature of ‘lands’ under the GST Law and no GST is chargeable for sale.

However, land development services such as laying pipes and connections separately are charged GST at standard rates. 

Rabia Khanum, an unregistered person under GST, had to apply for advance rulings with the Karnataka bench. The land sold was developed with basic amenities and a power substation for electricity since the authority would not allow such sales or permit any lands devoid of these facilities.

The applicant enquired if GST must be charged and got a reply saying that plots with works completion for basic amenities are not subject to GST. However, contrasting rulings have been issued regarding the levy of GST on selling plots of land.

The Gujarat AAR earlier directed that land sold with basic amenities attracts GST. These include waterline, drainage, and electricity. The authority hinted that taxpayers must check the nature of activity on the land. It further ordered that sellers fix the prices based on the super built-up area and not the plot’s total measured area.

On the other hand, point 5(b) of Schedule II further states that the construction of any complex, building or civil structure for further sale is considered a supply of service and is liable to GST. 

Although the advance ruling is binding upon only the applicant, it provides enough cues for the industry players to gear up. 

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@clear.in

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