Case Title | Dipesh Anilkumar Naik |
Court | Gujarat AAAR |
Honorable Judges | Member Milind Torawane & Member Seema Arora |
Citation | 2021 (12) GSTPanacea 76 HC Gujarat GUJ/GAAAR/APPEAL/2021/35 |
Judgement Date | 22-December-2021 |
Council for Petitioner | Avinash Poddar |
Council for Respondent | NA |
Section | Section 7 |
In Favour of | In Favour of Revenue |
The Gujarat Bench of Member Milind Torawane & Member Seema Arora has held that the transaction/activity of the appellant is not covered under Entry No.5 of Schedule-III of the CGST Act, 2017 as it is a sale of developed plots and is a supply of taxable service falling under the head ‘Construction services’ appearing at Sr.No.3 of Notification No.11/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time) issued under the CGST Act, 2017 and is liable to GST at 18%, for the reasons discussed hereinabove.
FACTS OF THE CASE
The appellant Shree Dipesh Anilkumar Gujarat has submitted that he is a farmer having a vacant land outside the municipal area of town for which he has got necessary approvals from the Plan Passing Authority(the Jilla Panchayat) as per which the seller of land was required to develop the primary amenities like sewerage and drainage line, water line, electricity line, land leveling for road, pipe line facilities for drinking water, street lights, telephone line etc.
He would then sell the individual plots to different buyers without any construction on the same but by providing the primary amenities as mentioned above, which are mandatory requirements of the approved Plan Passing Authority (the Jilla Panchayat).
The appellant had filed an application for Advance Ruling on the above matter with the Gujarat Advance Ruling Authority asking the following question seeking Advance Ruling:
“Whether GST is applicable on sale of plot of land for which, as per the requirement of approval by the respective authority (the Jilla Panchayat), primary amenities such as, Drainage line, water line, electricity line, land leveling etc. are to be provided by the applicant?
The Gujarat Authority for Advance Ruling (hereinafter referred to as ‘GAAR’) has ruled that GST is applicable on sale of plot of land for which, as per approval of the respective authority (the Jilla Panchayat), primary amenities such as, Drainage line, water line, electricity line, land leveling etc. are to be provided by the applicant, on the following grounds:
(i) Entry 5 of Schedule-III of the CGST Act covers sale of land which is excluded from GST
Aggrieved with the aforesaid ruling, the appellant has filed the present appeal on 31.08.2020 and has submitted the statement of facts as under:
The appellant, who is a farmer, is having all the necessary approvals for a proposed project on the vacant land (that he is having outside the municipal limits) from the plan passing authority i.e. the Jilla Panchayat and as per approved plan, the appellant is mandatorily required to construct/develop the basic common facilities like drainage, water line, electricity line, road, compound wall, etc.
And the cost shall be borne by the appellant or as per the mutual decision of the stakeholders; that the appellant wants to sell the vacant land by dividing it into multiple plots to individual buyers, but to comply with the above mentioned condition of Jilla Panchayat, they are proposing to enter into a contract/agreement to sell the land to individual buyers with a mandatory condition that the buyers of the land will construct the common facilities such as drainage, water line, electricity line, road, compound wall, etc., as instructed by the plan passing authority, by creating their own association of persons(AOP) of which all the plot holders shall be members;
That the sale of land by the appellant will be a conditional sale to the individual buyers and it will be mere sale of plot of land and the liability to construct the common facilities as per the agreement will be on the purchasers of land by creating their own AOP or by way of any other constitution
COURT HELD
Considering the facts as recorded, held that the transaction/activity of the appellant is not covered under Entry No.5 of Schedule-III of the CGST Act, 2017 as it is a sale of developed plots and is a supply of taxable service falling under the head ‘Construction services’ appearing at Sr.No.3 of Notification No.11/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time) issued under the CGST Act, 2017 and is liable to GST at 18%, for the reasons discussed hereinabove.
The appeal filed by Shree Dipesh Anilkumar Naik is rejected
ANALYSIS OF THE JUDGEMENT
In the present case, the appellant is the owner of the land, who develops the land/gets the land developed with an infrastructure such as Drainage line, Water line, Electricity line, Land leveling etc. as per the requirement of the approved Plan Passing Authority (Jilla Panchayat) and thereafter, sells such developed land as plots.
The appellant’s sales price includes the cost of the land as well as the cost of common amenities as mentioned above, on a proportionate basis. Schedule II of the CGST Act, 2017 pertains to activities or transactions to be treated as ‘supply of goods or supply of services’.
As per clause 5(b) of the Schedule-II of the CGST Act, 2017, ‘construction of civil structure or a part thereof, intended for sale to a buyer’ is a ‘Supply of service’ and, hence, is liable to the Goods and Services Tax(GST). Thus, the activity of sale of developed plots would be covered under the clause ‘‘construction of civil structure or a part thereof, intended for sale to a buyer’.
Thus, the said activity is not covered under Entry No.5 of Schedule-III of the CGST Act, 2017 as contended by the appellant, but it is a supply of taxable service involving ‘construction of civil structure or a part thereof, intended for sale to a buyer’ falling under the head ‘Construction services’ appearing at Sr.No.3 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) and GST at the rate of 18% is payable on the sale of developed plots in terms of CGST Act, 2017 and Rules thereunder.
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