GST exempt on sale
Case Title | Juridictional Officer |
Court | Madhya Pradesh AAAR |
Honorable Judges | Member Navneet Goel & Member Lokesh Kumar Jatav |
Citation | MP/AAAR/01/2022 2022 (4) GSTPanacea 379 HC Madhya Pradesh |
Judgement Date | 13-April-2022 |
Council for Appellant | Atul Shrivastava |
Council for Respondent | NA |
Section | Section 100 of CGST Act |
In Favour of | In Favour of Appellant |
The Madhya Pradesh Bench of Member Navneet Goel & Member Lokesh Kumar Jatav has held that bench are of the opinion that the activity of the sale of developed land is covered under ‘construction of a complex intended for sale to a buyer’ and is thus covered under ‘construction services’ and GST is payable on the sale of such developed land in terms of CGST Act/Rules and relevant Notification issued from time to time.
FACTS OF THE CASE
M/s. Bhopal Smart City Development Corporation Limited (hereinafter referred to as ‘BSCDCL‘), Zone – 14,had submitted application under section 97(1) of CGST Act & MP GST Act seeking Advance Ruling from the Authority for Advance Ruling, Madhya Pradesh, on one of the following questions;
(I) Whether GST is applicable on sale of developed plot of land for which consideration is received before the issuance of completion certificate (if any), under the following facts:-
(a) The sale of plot is after carrying out the development activities providing amenities such as drainage line, water line, electricity line, land leveling, and common facilities viz. road and street light etc. which are to be provided by BSCDCL;
and
(b) remaining construction activities including civil foundation on the developed plot will be carried out by the buyer on their own account and cost.
In this case the AAR, MP, pronounced it’s ruling vide its Order No. 16/2021, dated 22-11-2021 ordering that undertaking development activities does not constitute a supply within the meaning of section 7 of the GST Laws and therefore GST is not applicable on such sale of developed land.
Being aggrieved by the said ruling of the AAR, the jurisdictional officer has filed appeal
The appellant has challenged the above referred ruling of the AAR mainly on the following grounds
(i) The ruling has given consideration to the definition of land only and ignored other associated factors like changing of the character of raw land to developed land.
(ii) The sale of developed land by BSCDCL is not just a case of sale of land, but is altogether a different transaction. In this transaction, the monetary value of the facilities provided like water, road, electricity supply line, drainage line etc. are included in the value of Developed Land.
(iii) The respondents are not only selling the plot of land but also transferring the development works done on that plot as the right to use such development activities gets automatically transferred to the buyer. (iv) The AAR has not given due consideration to the decision of Hon’ble Supreme Court in case of M/s. Name Construction Pvt. Ltd. (2013(29) STR3 (SC)). (v) The cost of development activity is also charged to the buyer of plot by way of value addition.
(vi) Thus, this transaction falls under entry No. 5 (b) of Schedule II of the CGST Act 2017 and is thus liable for payment of appropriate GST.
GST exempt on sale
COURT HELD
Considering the facts as recorded, held that bench are of the opinion that the activity of the sale of developed land is covered under ‘construction of a complex intended for sale to a buyer’ and is thus covered under ‘construction services’ and GST is payable on the sale of such developed land in terms of CGST Act/Rules and relevant Notification issued from time to time
The activities of the respondent, M/s Bhopal Smart City Development Corporation Limited will fall under the clause (b) of paragraph 5 of Schedule -II of Madhya Pradesh Goods and Services Tax Act and Central Goods and Services Tax Act. Hence the activities of the respondent attracts CGST @ 9% and SGST @ 9% as per serial no 3 of Notification No. 11/2017 Central Tax (Rate), dated 28-6-2017, as amended.
The value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.
GST exempt on sale
ANALYSIS OF THE JUDGEMENT
The activity of purchase or allotment of land and selling the said land after undertaking development activities of providing amenities such as Drainage line, water line, electricity line, land leveling, and common facilities viz. road and street light etc. is liable to GST.
The AAR has not given due consideration to the crucial issues related to the difference between sale of barren land and developed land. Thus, the AAR in its Order No 16/2021, dated 22-11-2021 has erred in ordering that ‘the sale of developed land, by the applicant as per the facts provided by him where the development work is limited to providing common amenities (common drainage, water line, electricity line, land levelling, road and street light) and no development work will be done by the applicant after the sale of the developed land and if no advance from the customer for undertaking development activities is taken then it does not constitute a supply within the meaning of section 7 of the GST Laws and therefore GST is not applicable on such sale ‘.
Accordingly bench quash the Order No 16/2021 dated 22-11-2021 passed by AAR, Madhya Pradesh, Indore
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