GST Rulings

Is Sale of Developed Plots Liable to GST?

In Re: Satyaja Infratech - Ruling dated Sep.20, 2019 - Authority for Advance Rulings (Gujarat)

Background: The firm purchases land. It converts the land into integrated residential plots with the following facilities: external compound wall, main entry gate, walls separating internal plots, internal roads, plantation surrounding the plots, rain water harvesting system, common bore well, drainage, children play area, club house, underground water supply / electricity connection, swimming pool, garden, tennis court, etc. Of these, some facilities (like plantation, drainage, internal roads and bore wells) are essential for selling residential plots as per the Government regulations. The developed residential plots are sold as such, viz., without construction of building.

Ruling: Purchase of land, development of such land with facilities as aforementioned, and sale of such developed plots is liable to GST. Such activity falls under clause 5(b) of Schedule II to the CGST Act. [The said clause covers "construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly".]

Comment(s): At the outset, the ruling is laid without adequate finding. Undoubtedly, there is an element of service involved in development of plots, more so when facilities like children play area, club house, swimming pool, tennis court are added. But, whether sale of developed land can be subject to GST, and importantly issues surrounding valuation of such supply, are likely to be embroiled in litigation.

Srinivasan V, Advocate

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