Value of Supply of Residential/Commercial Property with Undivided Rights of Land

AAR Gujarat explains What Will Be The Value Of Supply For The Sale of Residential / Commercial Property With Undivided Rights of Land in the case of Karma Buildcon

ADVANCE RULING NO. GUJ/GAAR/R/33/2020 DT:02.07.2020 COMPANY NAME M/S. KARMA BUILDCON

FACT OF THE CASE:

1. The Applicant submitted that they are engaged in the business of construction. For the purpose of the business they buy land and develop residential / commercial property on the land. For the purpose they engaged Architects, Consultants, Structural engineers to prepare plan for development of residential/ commercial property.

2. Further submitted that prescribed approval from various authorities are procured to develop residential/ commercial property on such land.

3. The applicant further submitted that cost of land that is being transferred to the buyers on inclusive of land or undivided share of land basis need to be allowed to be deducted as a whole and not as provided in Not.No.11/2017 – CT (Rate) and 08/2017 – I.T (Rate) both dated 28.06.2017 as one third (33.33%) of the value, because in applicant’s case the cost of land is distinctly determinable and is more than one third (33.33%) of the construction value of sale of property.

DISCUSSION AND FINDING:

1. The applicant’s contention is that cost of land that is being transferred to the buyers on inclusive of land or undivided share of land basis need to be allowed to be deducted as a whole and not provided in notification.

2. The applicant in their support has referred Rule 18(A)(A) of the erstwhile Gujarat Value Added Tax Rules, 2006, wherein it is provided that if at the time of the transfer of property in the goods involved in the execution of a works contract shall be determined by deducting the amounts paid by way of price for sub-contract made with registered dealer, if any, pertaining to the said work contract.

CONCLUSION:

Accordingly, the applicant contention to allow the deduction of actual value of land from the sale value on the grounds that their land value is ascertainable and other grounds is not legal terms of para 2 of Not.No.11/2017 – CT (Rate) dt: 28.06.2017 as amended vide notification no.1/2018 CT – (Rate) Dt: 25.01.2018.

Further, the reliance of Rule 18(A) (A) of the erstwhile Gujarat Value Added Tax Rules, 2006 is not warranted in the instant case since the Value Added Tax Act is no more in existence.

The Value Added Tax Act does not have any legal value in determination of GST Liability since the value of supply is to be arrived in terms of the Provisions of the GST Act.

Hence, the Notification No.11/2017 DT – Rate Dt: 28.06.2017 is applicable and Assesee contention is not accepted.