Page 23 - GSTL_6th August 2020_Vol 39_Part 1

2020 ] GST AND TRANSACTIONS IN IMMOVABLE PROPERTIES J5
having a plot of land”. What does “having” mean in the context of immovable
property? In what capacity does the applicant hold the land? As owner, or as a
lessee? Subject to the provisions of a lease deed, lessee may also construct build-
ing, especially if the land is taken on long lease such as 30 years plus, or 99 years
and so on. The Members of AAR do not realize the importance of clearly record-
ing how the applicant holds the title to the land.
In para 10, the AAR records that the applicant is the owner of the land.
In para 8, the AAR notices Entry 5 of Schedule-III to the CGST Act, which speci-
fies “sale of land” as neither supply of goods nor of service. In para 11, it is rec-
orded that the developed plots are sold and the purchasers put up houses or vil-
las on the developed plot. So, clearly, what is sold is land, albeit after the devel-
opment. How does it become “construction of complex”? Can making of roads,
drains, of laying water and electricity lines amount to “construction of complex”?
There is no discussion at all on these technical aspects.
The AAR ruling also records that the sale price includes cost of land the
development charges. But the ruling says nothing about excluding the cost of
land. Assuming that the service is “construction service”, GST ought to be re-
stricted to the charges on development of the plots. But the AAR order simply
rules that sale of developed plot is chargeable to GST. When an Act of the par-
liament clearly excludes “sale of land” from the charge of GST, how does an
AAR bench, working under the Act ignore unambiguous provision even after
recording it in the order?
More important question not considered by the AAR is : “When an own-
er carried on developmental work on the land owned by him, can it be said that
he is supplying taxable service to anyone? Isn’t it a case of provision of service to
himself?”
Since the order does not record whether sale consideration was received
during the progress of plot development, it is not even clear whether the AAR
could have referred to paras (b) of Entry 5 of Schedule-II. On the other hand,
where the plots are sold after development without pre-existing agreement for
sale of land, it cannot even be argued that the land owner-cum-developer pro-
vided development service to the buyer of the developed plot. At the time of un-
dertaking the development work, if there were no agreement to sell between the
applicant and another person, it can hardly be said that there is “supply” to an-
other person.
The fact that many an information, which is vital for deciding the appli-
cation does not find place in the order, or there are no findings on such issues
shows that the members were not aware of all the attendant facts and law, and
that the application was not comprehensively argued.
This AAR order may be contrasted with another AAR order from Karna-
taka in In Re : Maarq Space Pvt. Ltd., 2019 (31) G.S.T.L. 554 (A.A.R. - GST). In this
case, which also involves development of plot, the distinguishing fact is that the
land is not owned by the developer. The developer is entitled to 25% of the sale
proceeds of the plot. The AAR correctly concludes that only this money consid-
eration received by the applicant-developer is chargeable to GST. Thus, land re-
mained excluded from the charge of GST.
[Continued on page J8]
GST LAW TIMES  6th August 2020  23