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2023 (10) TMI 787 - AAR - GSTLevy of GST - sale of developed plots by applicant to various customers after development - development of plots service provided to the land owners - transfer of development rights by the land owner in consideration of land development services - applicability of Reverse Charge Mechanism - transfer of development rights and development of plot service - time of payment - applicable Notification. Whether sale of developed plots by applicant to various customers after development is taxable under the GST Acts or not? - HELD THAT - The activity of sale of land is covered as item (5) of the Schedule III to the CGST Act. The Circular No. 177/09/2022 dt 03.08.2022 issued by Government of India, Ministry of Finance, Department of Revenue (Tax Research Unit) at para-14.3 states that Land may be sold either as it is or after some development such as leveling, 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 - the value of Land is not taxable either sold as undeveloped land or selling it after the land is developed. Whether development of plots service provided to the land owners is taxable under GST and if so under which Notification and under which entry? - HELD THAT - The supply of works contract service to customers as well as land owners, who have transferred the development rights to the applicant, is taxable at the rate of 9% CGST 9% SGST as sub entry xii of entry at serial no. 3 with SAC 9954 of the notification 11/2017. Whether transfer of development rights by the land owner in consideration of land development services received is taxable or not under the provisions of the GST Acts? If taxable, whether the applicant is liable to pay GST under RCM basis on the development rights received from the land owners or whether the land owner is only liable to pay GST on such transfer of development rights. What is the applicable Notification and entry in the Notification? - HELD THAT - As the category of the works contracts under taken by the applicant, who develops plots by leveling or altering land are not included in the above notification 04/2019, this exemption is not applicable to the transactions made by them - Further the Notification 13/2017 was amended vide Notification 5/2019 dt 29.03.2019 to include services supplied by way of transfer of development rights by any person to a promoter for construction of a project; and thus this supply attracts liability on reverse charge. The term project is defined in the notification as a Real estate project or a residential real estate project as defined under Sec 2 (zn) of the Real-estate (regulation and development) Act 2016 -The Promoter is liable to pay CGST SGST at the rate of 9% each on Reverse charge basis on transfer of development rights under entry 5B of the notification 13/2017 as amended by notification 5/2019 on 29.03.2019. The applicable rate is 9% CGST SGST respectively.
Issues Involved:
1. Taxability of sale of developed plots under GST. 2. Taxability of development services provided to landowners under GST. 3. Taxability of transfer of development rights under GST and liability under reverse charge mechanism (RCM). 4. Determination of value of supply for GST on development rights and services. 5. Input Tax Credit (ITC) eligibility on development rights. 6. Time of payment for GST on development rights and services. Summary: Issue 1: Taxability of Sale of Developed Plots - Clarification: The sale of developed plots by the applicant is not taxable under GST. The activity of selling land, whether developed or undeveloped, is covered under item (5) of Schedule III to the CGST Act and does not attract GST as per Circular No. 177/09/2022 dated 03.08.2022. Issue 2: Taxability of Development Services Provided to Landowners - Clarification: Development services provided to landowners are taxable under GST. These services include leveling, laying drainage lines, etc., and attract GST at the applicable rate. The supply of works contract services to customers and landowners is taxable at 9% CGST and 9% SGST as per sub-entry xii of entry at serial no. 3 with SAC 9954 of Notification 11/2017. Issue 3: Taxability of Transfer of Development Rights and Liability under RCM - Clarification: The transfer of development rights by the landowner to the applicant is taxable under CGST and SGST Acts. The promoter (applicant) is liable to pay GST on a reverse charge basis at the rate of 9% each for CGST and SGST under entry 5B of Notification 13/2017 as amended by Notification 5/2019 dated 29.03.2019. This applies to real estate projects as defined in the Real Estate (Regulation and Development) Act 2016. Issue 4: Determination of Value of Supply for GST - Clarification: The value of supply for works contracts is determined under Section 15 of the CGST Act. If the value is not separately specified, Rule 30 of the CGST Rules read with Section 15 of the CGST Act will apply. Issue 5: Input Tax Credit (ITC) Eligibility on Development Rights - Clarification: The applicant can claim ITC on the GST paid under RCM for development rights received from registered landowners while discharging the liability to pay tax on development services provided. Issue 6: Time of Payment for GST on Development Rights and Services - Clarification: The time of supply for transfer of development rights is determined under Section 13(3)(b) of the CGST Act, which is the date immediately following 60 days from the date of issue of the invoice or voucher. For continuous supply of development services, the time of supply is determined by Section 13 read with Section 31(5) of the CGST Act, based on the due date of payment or the actual date of payment received. Final Ruling: - Sale of Developed Plots: Not taxable under GST. - Development Services: Taxable under GST at 9% CGST and 9% SGST. - Transfer of Development Rights: Taxable under RCM at 9% CGST and 9% SGST. - Value of Supply: Determined under Section 15 of the CGST Act. - ITC Eligibility: Yes, ITC can be claimed. - Time of Payment: As per the provisions of the CGST Act for development rights and continuous supply of services.
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