GST on sale of land after levelling, laying down of drainage lines etc.

Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST?

Under GST law, to levy the GST on any of the activity, the activity should fall under the definition of the “supply” which defined under the Section 7 of the Central Goods and Services Tax Act, 2017 (‘CGST Act, 2017’) which inter-alia includes all the forms of the supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental or lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of the business. The definition of the supply covers all the forms of the supply including the transfer of the land.

Transfer of Land–

It is pertinent to note that CGST Act, 2017 includes the Schedule III which includes some specific transactions or activities which shall not be treated neither a supply of the goods nor a supply of the services.

Para 5/Entry No. 5 of this schedule specifically includes the sale of the land. Therefore, the sale of the land will not subject to GST and there is no question of the ascertainment of the rate of GST on it.

Transfer of Developed Land (sale of land after levelling, laying down of drainage lines etc.) –

Para 5/Entry No. 5 of the Schedule III of the CGST Act,2017, states that the sale of land does not attract GST because such transaction exclusively relates to the transfer of ownership of land, which is an immovable property. But there was not a clear clarification regarding developed land i.e. sale of land after levelling, laying down of drainage lines etc. is taxable under GST.

In this regard, certain issues on taxability of services on which representations had been received were examined by the GST Council in its 47th meeting held on 28th and 29th June, 2022. Pursuant to the said meeting and discussions held, issue-wise clarifications as recommended by the GST Council has been issued. Out of these issues, one issue was also covered in relation to “Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST”

In this regard, it has been clarified by CBIC vide its Circular No. 177/09/2022-TRU dated 03^rd August, 2022 that as per Sl no. (5) of Schedule III of the Central Goods and Services Tax Act, 2017, ‘sale of land’ is neither a supply of goods nor a supply of services, therefore, sale of land does not attract GST.

Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST.

However, it may be noted that any service provided for development of land, like levelling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services.

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