In re Abhishek Darak (GST AAR Uttarakhand)
In this case both the members have different views on the taxability of ‘sale of developed land/plot’, the other issues related to it becomes irrelevant and hence, the ruling cannot be given to such related issues.
In light of above discussion & findings, we have different views in respect of the services (supra) proposed to be rendered by the applicant. Since we have different views on that particular issue, we are making a reference to the Appellate Authority for hearing and decision on said issue in terms of Section 98(5) of the Act ibid which provide that where the members of the Authority differ on any question on which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision on such question.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,UTTARAKHAND
1 This is an application under Sub-Section (1) of Section 97 of the CGST/SGST Act, 2017 (herein after referred to as Act) and the rules made thereunder filed by Shri Abhishek Darak, House No-1, Plot No.- 293, Ward 10-A, Near Gurukul Gandhiham, Kutch, Gujarat (here in after referred to as ‘the applicant’) is not registered with the GSTN and seeking advance ruling on the following questions:
a. Whether the activity of development and sale of land is taxable under GST;
b. If yes, then what will be the classification of the above activity;
c. If the answer to the first question is yes, what will be the taxable value of the supply stated in first question; d.If the answer to the first question is yes, will ITC be admissible.
2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
3. As per the said subsection (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of :
(a) Classification of any goods or services or both
(b)Applicability of a notification issued under the provisions of this Act,
(c) Determination of time and value of supply of goods or services or both,
(d)Admissibility of input tax credit of tax paid or deemed to have been paid
(e) Determination of the liability to pay tax on any goods or services or both
(f) Whether the applicant is required to be registered
(g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term
4. Since applicant has sought advance ruling on classification of supply, determination of value of supply, admissibility of ITC 85 determination of tax liability, therefore, in terms of said Section 97(2) (a), (c ), (d) 85 (e) of the Act, the application filed by the applicant was admitted. Accordingly hearing was fixed on 07.08.2020 which was attended by the Shri Amit Aswal, CA on behalf of the applicant and reiterated the submissions given with the application. He further stated that because of RERA Act, they have to build road, provide drainage, electricity poles etc During the course of hearing Ms Preeti Manral (DC) ,concerned officer of SGST- • Uttarakhand was also present and stated that firstly application could not be entertained as the applicant has not stated the project. Secondly, she gave three rulings of different AARs whereby it has been considered taxable.
5. On perusal of application, we find that the applicant is an individual and planning to purchase a land and develop it with an infrastructure as per the requirement of the approved planning authority and sell units of the purchased land as plots to customers. The details are as under:
a. Forming land into layout after obtaining necessary plan approval from the development authority, get all the permissions required to take up, commence 85 complete what would be layout, comprised of individual sites;
b. levelling the land;
c. construction of boundary wall;
d. construction of roads;
e. laying of underground cables 85 water pipelines;
f. laying of underground sewage lines with sewer treatment plants;
g. development of landscaped gardens etc;
h. demarcation of individual plots;
i construction of overhead tanks;
j other infrastructure works;
k common amenities like garden, community hall etc
Further sale of such sites is done to end consumer who may construct houses/villas in the plots.
6. The applicant stated that sale of land is excluded from the scope of supply under entry no. 5 of Schedule III appended to the Act. They further stated that in terms of definition of “composite supply 86 principal supply” , the predominated supply is land and development activity is incidental to the sale of land. Moreover, the development activity is naturally bundled with the sale of land, thus the same is fall in the ambit of entry no. 5 of Schedule III appended to the Act. As regards to the value aspect of said supply, the applicant stated that the provisions of Rule 27 to 30 do not apply to the transaction, therefore the value shall be determined as per 31 of Rules. They also stated that in case the activity is taxable, thus they are entitled for ITC in terms of Section 16(1) of the Act and if in case the said supply is classified as `works contract service”, the ITC still available to them.
7. Admissibility of the Application : The concerned officer has given the order of Maharashtra AAR in the case of Saint Gobain India (P) Ltd (Order No GST ARA – 51/2019-20/B38 dated 17.03.2020). She has raised the objection regarding admissibility of the application in the present case. The applicant has submitted written submission in this regard whereby he has brought our attention to Section 95 of CGST Act, 2017 and the same is reproduced below—
95. In this Chapter, unless the context otherwise requires,-
(a) “advance ruling” means a decision provided by the Authority or the Appellate Authority 1 [or the National Appellate Authority] to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 for of section 101Ch in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;
(b) ‘Appellate Authority” means the Appellate Authority for Advance Ruling referred to in section 99;
(c) “applicant” means any person registered or desirous of obtaining registration under this Act;
(d) “application” means an application made to the Authority under sub-section (1) of section 97;
(e) “Authority” means the Authority for Advance Ruling referred to in section 96.
(f) “National Appellate Authority” means the National Appellate Authority for Advance Ruling referred to in section 101A.1
In the present case we find that the applicant has proposed to undertake the required project and therefore has filed the application for clarification on the questions under the Act. Therefore, the application is covered under Section 95(a) of the Act. As far as the Ruling of Maharashtra AAR in the case of Saint Gobain is considered, the facts of the case are different since in the case of Saint Gobain they are proposing to manufacture a new product for which classification is sought and since the product is not available for testing therefore the classification cannot be given.
We find that no such issue is there in the present case . The issue is sale of developed land for which no testing is required. Further we find support of admitting the present application in the judgment of Hon’ble Supreme Court given in the case of National Co-operative Development Corporation Vs Commissioner of Income Tax, decided on 11.09.2020. The Court was of the opinion that a vibrant system of Advance Ruling can go a long way in reducing taxation litigation. This is not only true of these kinds of disputes but even disputes between the taxation department and private persons, who are more than willing to comply with the law of the land but find some ambiguity.
“Instead of first filing a return and then facing consequences from the Department because of a different perception which the Department may have, an Advance Ruling System can facilitate not only such a resolution, but also avoid the tiers of litigation which such cases go through as in the present case. In fact, before further discussing this Advance Ruling System, we can unhesitatingly say that, at least, for CPSEs and Government authorities, there would be no question of taking this matter further once an Advance Ruling is delivered, and even in case of private persons, the scope of any further challenge is completely narrowed down.”
Therefore, in terms of Section 97(2) of the Act, the present application is admitted.
8. Now coming to the issue whether the activity of development and sale of land is taxable under GST or otherwise. In this context, on going through the legal provisions 86 submissions made by the applicant, we have different views in this matter and are discuss as under:
(A) [Ruling per: Amit Gupta, Member]:
I find that the applicant is planning to purchase land and develop it with infrastructure by levelling of land, demarking Plots, Constructing Road, building drainage line, installing water line, erection of electricity line etc. as per the requirement of the approved Plan Passing Authority and sell units of the purchased land as plots to the customers. I find that the applicant has given his written submission whereby he has given that as per RERA, 2016 he has to follow certain rules and regulations before selling the land to the end customers. As per Section 3 and 4 of RERA, 2016 the applicant has to register with RERA and mandatorily get the Plan approved from the local authority which is Mussorie Dehradun Development Authority (MDDA) in his case. I further find that he has stated that no separate charges will be made for development activities undertaken by the applicant such as construction of road, electrification, levelling of land etc… The only document will be sale deed of the land on payment of stamp duty as per the statutorily laws. Before deciding the taxability of the sale of developed plot (land), let me elaborate the relevant provisions of CGST Act, 2017.
CHAPTER III
LEVY AND COLLECTION OF TAX
Scope of supply
