2021 (10) TMI 1061 - AAR - GST

Levy of GST - activity of disposal of developed plots of land to allottee members of the applicant from and out of the land received from the TSIIC for specified purpose of industrial development - the activity failing under Entry 5 of Schedule III of Central Goods Service Tax Act, 2017 and corresponding provisions under Telangana Goods Service Tax Act, 2017 as amended - activity of infrastructure development (ID) of land received from the TSIIC for specified purpose of industrial development and undertaken on behalf of allottee members (allottee(s) or the member(s)) - supply under Section 7 of the Central Goods Service Tax Act, 2017 corresponding provision under Telangana Goods Service Tax Act, 2017 as amended. HELD THAT - There will be (2) sale deeds one between TSIIC and the applicant and the second between the applicant and the individual industrialist. The peculiar circumstances obtaining from these (2) transactions are due to the larger objective for development of industrial parks in pursuance of the industrial policy of the State - the TSIIC ltd executes an agreement for sale of land with the applicant and collects the full consideration for the cost of land but sets condition to execute the sale deed to transfer the title only after the applicant completes infrastructure development in the land. The perusal of the contract entered by the applicant with the TSIIC ltd clearly indicates that the property in land will be transferred to the applicant only when the applicant completes the development of infrastructure of schedule land. However, this clause in the agreement appears to have been made to meet the larger objective enumerated in industrial policy of the State. Though there is a contract for development of the land the other (2) conditions enumerated above are not fulfilled i.e., transfer of property in goods from the applicant to the TSIIC ltd and payment of consideration by TSIIC ltd to the applicant. The examination of the agreement between the applicant and one individual allottee M/s. Beaver tracks pvt ltd reveals that the applicant has taken up development of infrastructure as per the conditions of allotment set by TSIIC. And that M/s. Beaver tracks pvt ltd will get the title of the land only on commencement of industrial production. There is no clause in the agreement by which the applicant is obliged to develop the land for the industrialist like M/s. Beaver tracks pvt ltd. This obligation is only with TSIIC ltd. Thus even in the contract with individual industrialist like M/s. Beaver tracks pvt ltd the above (3) conditions for making such a supply as supply of works contract are not fulfilled - Further the applicant also indicates that it may take up certain infrastructure development after the title to land is transferred to M/s. Beaver tracks pvt ltd by way of sale deed. It is also indicated that consideration will be recovered for executing such works. Such development works executed after the sale deed is registered will necessarily amounts to works contract and the consideration received for the same will be liable to tax under CGST Act, 2017. If the applicant sells the land after developing by way of erecting a civil structure or a building or a complex then such supply is liable to tax under CGST/SGST Acts. However if land is sold without any development involving any civil structure or building or complex such supply falls under paragraph 5 of schedule III to Section 7(2) of CGST Act, 2017 and hence is exempt from tax - If the applicant executes works contracts involving transfer of property in goods for a consideration under an agreement of contract such consideration will be liable to tax. However if these elements are missing in execution of a construction it shall not be liable to tax. Application disposed off.

Summary

Issues:
1. Whether the disposal of developed plots of land to allottee members falls under GST.
2. Whether infrastructure development undertaken by the applicant qualifies as a "supply" under GST.

Analysis:

Issue 1:
The applicant, a private limited company, sought clarification on whether selling developed land to allottee members is subject to GST. The company, formed by industrialists, received land from TSIIC for industrial development. The sale agreement with TSIIC is conditional upon completing infrastructure development before transferring the title to individual industrialists. The applicant argued that the sale of land should be exempt from GST as per Schedule III of the CGST Act, which includes the sale of land as exempt unless sold with a constructed complex. The ruling stated that selling land without development is exempt, but if a civil structure is erected, it is taxable under CGST/SGST Acts.

Issue 2:
Regarding infrastructure development, the applicant's activities were examined in detail. The agreement with TSIIC involved transferring land only after infrastructure development completion. The ruling clarified that for a transaction to be considered a works contract under CGST Act, certain conditions must be met, including property transfer, consideration, and execution as per a contract. The ruling found that the applicant's agreement with TSIIC did not fulfill these conditions. Similarly, the agreement with an individual industrialist did not meet the criteria for a works contract. It was highlighted that any development works post-sale deed registration would be considered a works contract and subject to tax.

In conclusion, the ruling stated that selling developed land with structures is taxable under GST, while selling undeveloped land is exempt. Additionally, works contracts involving property transfer for consideration are taxable, but if these elements are absent, the transaction is not taxable. The application by M/s. TIF Integrated Industrial Parks Pvt. Ltd. was disposed of accordingly.