2021 (12) TMI 39 - AAR - GST

Levy of GST - sale of developed plot of land for which consideration is received before the issuance of completion certificate - Classification of supply - supply of goods or supply of services or both - applicable rate of GST - HSN or SAC of GST - Entry No of the Notification on the supply or activities or transactions? - actual value of Land as per Government Guidelines can be excluded from the Total Consideration (or Gross amount charged) or not - benefit of Para-Z of Notification No 11/2017 dated 28-06-2017 regarding l/3rd abatement/exclusion on account of the value of transfer of land or undivided share of land from the total amount charged. HELD THAT - The intention of the legislature is thus clear regarding exclusion of land from the purview of GST and accordingly, it is beyond doubt that there is no GST on the sale of land per se by excluding sale of land from the definition of supply - Once it is established that GST is not leviable on sale of land on account of sale of land not being supply, we need to examine what constitutes land and whether in the given facts of the case, the supply is of something other than land. It is pertinent to note that the moot question here is whether there is sale of anything other than land since the query stales that the plot has been sold after carrying out the development activities or providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc. The development work done on the land is for the whole parcel of land and not for a given plot, which is sold to the customers. The title in the common area and amenities does not belong to the owners of the plot but rests with the Urban Local Body as per the applicable laws. Further, there are easement rights and right of way to be granted, which further show that there is no collective ownership of the common amenities with the plot owners or any association of such plot owners - the provision of common amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc to the buyers of the plot of land does not have any bearing on the taxability or otherwise of the sale of plot after carrying on the development work for providing amenities. The question raised by the applicant is qualified by the phrase issuance of completion certificate . In this regard, we have to say that from the discussion above, it is clear that development of land is not akin to construction of a complex or building. The concept of obtaining a completion certificate is applicable to the construction of a complex or building and not to development of land, so far as GST is concerned. Therefore, it is immaterial whether any money is received by the applicant from prospective buyers before development of plots is completed and a completion certificate is received by the applicant from the appropriate authority - Principles of interpretation of Statutes, Deeds and Documents refer to an Absurdity Limit, which states that a statute cannot be interpreted literally if it would lead to an absurd result. There is no concept of obtaining completion certificate in case of development of land since development of land is not akin to construction of a building or a complex. Therefore, if development and sale of such developed land by a person is treated to be a taxable supply distinct from sale of land, then each subsequent sale of such parcel / plot of land would also become a taxable supply which makes the interpretation give an absurd result. The sale of developed land, by the applicant as per the facts provided by him where the development work is limited to providing common amenities (common drainage, water line, electricity line, land levelling, road and street light) and no development work will be done by the applicant after the sale of the developed land and if no advance from the customer for undertaking development activities is taken then it does not constitute a supply within the meaning of Section 7 of the GST Laws and therefore GST is not applicable on such sale - other questions need not be answered as has become absurd.

Summary

Issues Involved:
1. Applicability of GST on the sale of developed plot of land.
2. Rate of GST on the supply, if applicable.
3. HSN or SAC code for the supply, if applicable.
4. Relevant notification entry for the supply or activities.
5. Exclusion of land value from the total consideration for GST calculation.
6. Availability of 1/3rd abatement/exclusion on account of the value of land transfer.

Detailed Analysis:

1. Applicability of GST on the Sale of Developed Plot of Land:
The primary issue is whether GST is applicable on the sale of developed plots of land, where consideration is received before the issuance of a completion certificate. The applicant, a Public Sector Undertaking, is involved in the development of plots by providing amenities such as drainage lines, water lines, electricity lines, land leveling, and common facilities like roads and street lights. The applicant argued that these activities should not attract GST.

The judgment analyzed the definition of "supply" under Section 7 of the GST Act, which includes all forms of supply of goods or services. However, Schedule III of the GST Act explicitly excludes the sale of land from the definition of supply. The ruling emphasized that the development work, such as providing common amenities, does not transfer ownership of these amenities to the plot buyers. These amenities are for the collective use of all plot owners and do not constitute a separate supply.

The ruling referred to various judicial precedents and statutory definitions, concluding that the development work on the land is subsumed in the land itself and ceases to have a separate identity. Therefore, the sale of developed land, where the development work is limited to providing common amenities and no further development work is undertaken by the applicant after the sale, does not constitute a supply under Section 7 of the GST Act. Consequently, GST is not applicable on such sales.

2. Rate of GST on the Supply, if Applicable:
Given the ruling that the sale of developed land does not constitute a supply, the question of the applicable rate of GST becomes redundant.

3. HSN or SAC Code for the Supply, if Applicable:
Similarly, since the sale of developed land is not considered a supply, determining the HSN or SAC code for the supply is unnecessary.

4. Relevant Notification Entry for the Supply or Activities:
As the sale of developed land is not deemed a supply, identifying the relevant notification entry for the supply or activities is not required.

5. Exclusion of Land Value from the Total Consideration for GST Calculation:
The applicant sought to exclude the actual value of land from the total consideration for GST calculation if the sale of developed land was considered a supply. However, since the ruling determined that the sale of developed land is not a supply, this question is also redundant.

6. Availability of 1/3rd Abatement/Exclusion on Account of the Value of Land Transfer:
The applicant inquired about the benefit of 1/3rd abatement/exclusion on account of the value of land transfer from the total amount charged, as per Notification No. 11/2017. Since the sale of developed land is not considered a supply, this question is irrelevant.

Conclusion:
The ruling concluded that the sale of developed land, where the development work is limited to providing common amenities and no further development work is undertaken by the applicant after the sale, does not constitute a supply under Section 7 of the GST Act. Therefore, GST is not applicable to such sales. Consequently, the other questions raised by the applicant became redundant. The ruling is subject to the provisions under Section 103(2) and can be declared void under Section 104(1) of the GST Act.