Page 26 - GSTL_20th August 2020_Vol 39_Part 3

J58 GST LAW TIMES [ Vol. 39

APPLICABILITY OF GST ON SALE OF A PLOT OF LAND AFTER DEVELOPMENT
APPLICABILITY OF GST ON SALE OF A
PLOT OF LAND AFTER DEVELOPMENT
By
CA Kevin Shah
*
MANAGING PARTNER, KEVIN SHAH & ASSOCIATES

Introduction :
Indirect Tax in construction industry in India is
an age-old practice, and before GST regime, VAT was
payable on transfer of property during handover of flats,
Service Tax was payable for rendition of the construction activity, Central Excise
was not payable because the activity resulted into emergence of an immovable
property. However, under GST, all the taxes are subsumed leading to payment
of single tax based on one common principle, i.e., a tax on supply (Section 7 of
the CGST Act, 2017). Any transfer, lease, barter, sale of flats under construction
and such other transactions would be qualified as supply and accordingly GST
becomes applicable on the same. Further, sale of land & sale of building/flats
[after Occupancy Certificate (OC), Building Completion Certificate (BCC), etc.]
are not liable [Entry 5 of Schedule-III to Section 7 of the CGST Act, 2017] for
payment of GST.
With the changing law, the manner of structuring transactions also un-
derwent a drastic change. It became clear that if a person wants to enjoy privilege
of non-payment of GST on transactions relating to immovable property then the
transaction should be certainly of either sale of land or sale of flats/buildings
after OC, BCC, etc. Apart from these two situations all the transactions would
attract demand of GST which can only be resolved by Courts in coming years.
To avoid litigations, transactions were structured in such a manner so as
to show them as “Sale of land” to free them from the clutches of GST. Recently,
such a transaction was tested before the Advance Ruling Authorities [Dipesh
Anilkumar Naik - GUJ/GAAR/R/2020/11, dated 19-5-2020] [2020 (38) G.S.T.L.
352 (A.A.R. - GST - Guj.)] wherein it was held that the plot sold after developing
the land with basic amenities along with demarcating the land into several small
plot of land by creating appropriate fencing is a taxable transaction under the
clause “Construction of complex intended for sale to buyer” and accordingly
GST is payable on the entire sale of such plot.
Facts of the case :
The applicant floated schemes of sale of plotted developed land. The
scheme which involves forming land into layout after obtaining necessary plan
approval from the Development Authority, get all other permission required to
take up, commence and complete what would be the layout, comprised of indi-
vidual sites. In the activity of plot development, the following are done; levelling
the land, construction of boundary wall, construction of roads, laying of under-
ground cables and water pipelines, laying of underground sewerage lines with
sewer treatments plant, development of landscaped gardens, drainage system,
water harvesting system, demarcation of individual plots, construction of over-
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* The views expressed in this article are the personal views of the author.
GST LAW TIMES  20th August 2020  26