Case Title | Maarq Space Private Limited |
Court | Karnataka AAAR |
Honorable Judges | Member D.P.Nagendra Kumar & Member M.S.Srikar |
Citation | 2020 (05) GSTPanacea 34 HC Karnataka KAR/AAAR/Appeal-19/2020-21 |
Judgement Date | 04-May-2020 |
Council for Petitioner | Sanjay M.Dhariwal |
Council for Respondent | NA |
Section | Section 101 |
In Favour of | In Favour of Assessee |
The Karnataka bench of Member D.P.Nagendra Kumar & Member M.S.Srikar has held that while the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner. Therefore, Bench hold that the activity of developing the land is a supply of service by the Appellant.
FACTS OF THE CASE
The Appellant has entered into a Joint Development Agreement (JDA) on 08/11/2017 with Land Owners for development of land into residential layout along with specifications and amenities. Cost of development shall be borne by Appellant. The consideration was agreed on revenue sharing basis in the ratio of 75% [for Land Owners] and 25% [for Developer / Appellant]. Pursuant to the JDA, the Appellant entered into an agreement with customers for sale of developed plots of land for consideration
In this connection the Appellant sought an advance ruling in respect of the following question:
- a) Whether the activity of development and sale of land attracts tax under GST?
- b) If the answer to the above question is yes, for the purpose of taxable value, whether provision of Rule 31 can be made applicable in ascertaining the value of land and supply of service?
The Karnataka Authority for Advance Ruling vide ruling No KAR ADRG NO 119/2019 dated 30-09-2019 = 2019 (11) TMI 994 – AUTHORITY FOR ADVANCE RULING, KARNATAKA held as follows:
The activities as envisaged in the agreement between the Appellant and the Land Owners amount to supply of service and is liable to be taxed under GST.
Rule 31 applies in the instant case and the value of the supply equals to the total amount received by the Applicant, which is equal to 25% of the market value of each plot.
Aggrieved by the above ruling, the appellant has filed this appeal.
COURT HELD
Considering the facts bench find that there is an element of service rendered by the Appellant in the form of plotted development of the land which is the dominant activity of the agreement
While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner.
Therefore, Bench hold that the activity of developing the land is a supply of service by the Appellant
ANALYSIS OF THE JUDGEMENT
The instant JDA is based on a revenue sharing model and the revenue accruing from the sale of the plotted land is divided between the landowner and the developer in the agreed ratio of 75:25. It is therefore, manifest that the transaction between the landowner and the Appellant-Developer is not a sale of land simplicitor but coupled with obligations for development of the land and provision of infrastructure/amenities.
There is an element of service rendered by the Appellant in the form of plotted development of the land which is the dominant activity of the agreement
While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner.
Therefore, bench hold that the activity of developing the land is a supply of service by the Appellant.
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