Sale of small plots of land with development work is not taxable under GST

In re Rabia Khanum (GST AAAR Karnataka)

The AAAR, Karnataka, in the matter of M/s. Ms. Rabia Khanum [KAR/AAAR /02/2023 dated February 14, 2023] has upheld the advance ruling passed by AAR, Karnataka and held that the amounts received by the assessee due to the consideration, advance received on the sale of small plots which have the development work are not taxable under GST.  Stated that, the sale of land developed by the assessee falls under the scope of the term “sale of land” as mentioned in Entry 5 of Schedule III of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), hence it is not taxable.

Facts:

Ms. Rabia Khanum (“the Respondent”) owns three acres of land and intends to convert it for residential use by forming small plots and selling them to the individual. The Respondent states that, it will be developing the land as per the regulations of the District Town and Country Planning Act (“DTCPA”), The Karnataka Real Estate Regulation Act and other zonal regulations that would be applicable while obtaining the sanction of the plan.

Thereafter, the Respondent filed an application before the AAR, Karnataka (“the AAR”), praying for a ruling on whether the consideration received for the sale of sites is taxable; whether the advance received towards the sale of the site is liable to GST and whether GST is applicable on sale of plots after completion of development works. The Respondent submitted that, land development would involve the formation of roads, formation of rainwater drains, laying of electricity cables, water pipes, sewerage lines, drilling of borewells for water supply, etc., creating necessary basic requirements for human habitation. After completion of these works, the plots will be released for sale by the sanctioning authority. On receipt of the full consideration, the ownership of the residential plot will be transferred to the buyer under the Transfer of Property Act.

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