Page 27 - GSTL_20th August 2020_Vol 39_Part 3

2020 ] APPLICABILITY OF GST ON SALE OF A PLOT OF LAND AFTER DEVELOPMENT J59
head tanks, other infrastructure works. Further common amenities like garden,
community hall, etc. are also offered in some schemes. Sale of such sites is done
to end customers who may construct houses/villas in the plots.
The sellers charge the rates on super built-up basis and not the actual
measure of the plot which is defined under Real Estate (Regulation and Devel-
opment) Act, 2016 [RERA]. The charges of super built-up area are slightly higher
which includes the cost incurred towards area used for common amenities,
roads, water tank and other infrastructure on a proportionate basis. Thus, in ef-
fect the seller is collecting charges towards the land as well as the common amen-
ities, roads, water tank and other infrastructure on a proportionate basis. In other
words, super built-up cost includes such common amenities, roads, water tank
and other infrastructure is an intrinsic part of the plot allotted to any buyer.
Observation :
The instant AAR held that GST is payable by treating the same as “ser-
vice” by relying on the ratio of the judgment of the Supreme Court [M/s. Narne
Construction P. Ltd. v. UOI - 2013 (29) S.T.R. 3 (S.C.)]. The underlying assumption
was perfectly justified in holding that the activities of the applicant in the present
case involving offer of plots for sale to its customers/members with an assurance
of development of infrastructure/amenities, lay-out approvals, etc. was a ‘ser-
vice’ and accordingly would qualify as supply.
Having regard to the nature of the transaction between the applicant and
its customers which involved much more than a simple transfer of a piece of
immovable property it is clear that the same constituted ‘service’ within the
meaning of the Act. It was not a case where the applicant was selling the given
property on “as is where is” basis, but was being sold with some assurance. It is
a case where a clear cut assurance was made to the purchasers as to the nature
and the extent of development that would be carried out by the applicant as a
part of the package under which sale of fully developed plots with assured facili-
ties was to be made in favour of the purchasers for valuable consideration. The
transfer of the site with developments in the manner and to the extent indicated
to customers was a part of the transaction, and the applicant had indeed under-
taken to provide a service. Any deficiency or defect in such service would make
applicant accountable before the Court of Law. Therefore, the judgment rightly
stated that the instant transaction is liable for payment of GST.
Author’s Opinion
The view taken by the Hon’ble Advance Ruling Authority has good mer-
its. However, it can be said with equal merit that the instant transaction is a con-
tract which will materialise only on happening of specific conditions as set out in
the sale agreement. The important point of contention is that the substance of the
transaction is transfer of ownership/title in the land, which would be passed
once all the conditions listed in such contract are fulfilled, until then the appli-
cant can do anything with that piece of land. This agreement, it follows, is for a
sale of land at a future date and it fails to fall into Entry (b) of Schedule-II. Ac-
cordingly, the scope of Entry 5 of Schedule-III would have to be enlarged so as to
include such transactions within its ambit. It seems appropriate to hold that such
transaction would classify as “an agreement of sale of land”. This dispute is not
likely to settle down soon as the AAR has not accepted this view.

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GST LAW TIMES  20th August 2020  27