Taxability of Sale of Developed Plot under GST

Arjuna (Fictional Character): Krishna, what circular has been passed under GST Act regarding sale of developed plot?

Krishna (Fictional Character): Arjuna, on 3rd August 2022 Circular No. 177/09/2022-TRU was passed for clarifying the taxability for sale of developed plot under GST.

Arjuna (Fictional Character): Krishna, whether sale of developed plot is taxable under GST?

Krishna (Fictional Character): Land, is an immovable property which is not subject to GST. As per Schedule III of the CGST Act, the land sale is neither considered as sale of goods nor as supply of services, hence it is exempt under GST.

Arjuna (Fictional Character): Krishna, are there any scenarios under which sale of developed plot becomes taxable?

Krishna (Fictional Character): Arjuna, when landowner offers his land to developer for development of land, then the specific service provided by him is taxable and the sale of developed plot is exempt.

Certain services for development of land under GST are taxable as per applicable rate i.e. for land levelling, laying of drainage lines, water lines, electricity lines, street lights, inner road lines, etc.

Arjuna (Fictional Character): Krishna, can you give detailed explanation about the sale of developed plot?

Krishna (Fictional Character): Arjuna, wait I’ll give you an example.

If Mr. A is the landowner of 100 plots and offered it for development to Mr. D the developer. Mr. D develops the plot by levelling land, electricity & water lines and other amenities. After development of land Mr. A sold the plot for Rs. 10,00,000. Here, developed plot is not taxable.

Arjuna (Fictional Character): Krishna, if Mr. A pays Rs. 3,00,000 to Mr. D for development services, what is the impact of GST on it?

Krishna (Fictional Character): Arjuna, if Mr. A pays Rs. 3,00,000 for development services to Mr. D then Rs. 3,00,000 attracts GST. Hence, it becomes taxable.

Arjuna (Fictional Character): Krishna, what should one learn from this?

Krishna (Fictional Character): Arjuna, sale of land is not taxable under GST, only stamp duty is required to be paid on the sales. However, the transactions are to be properly checked before conducting the tax implications as the amount may include the development charges in these transactions.