2022 (1) TMI 659 - AAR - GST

Classification of supply - supply of goods or supply of services - sale of plots - valuation of supply - rate of tax - whether mere value addition done to land will change the nature of land from immovable property and to goods taxable under the cover of supply? - HELD THAT - Firstly, that the roads, poles or drainages constructed by seller of land are at no time transferred to the purchaser of sub divided developed plot. These amenities will be available for use to every plot holder without any title to it. Further, these amenities in turn will be gifted to the local authority as mentioned by applicant and thereafter, the local authority will be the owner of such road and/ or electricity poles - Secondly, the sub divided plots sold will be merely on the basis of rate per sq. mts. of land being the actual land area of the plot and not on built up or super built-up area. Thirdly, the findings further indicate that no structure is being erected nor construction of facilities such as gyms, clubhouse etc. in the nature of complex, building, civil structure or part thereof are being undertaken. Thus, it can be concluded that the object for sale is land. Scope of Supply - HELD THAT - As per entry 5 (b) of Schedule II of SGST Act, construction of a complex, building, civil structure or part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation whichever is earlier. Thus, if some conditions are satisfied, construction of a complex, building, civil structure or part thereof, including a complex or building intended for sale to a buyer takes on the character of supply - In the instant case, the entry 5(b) of Schedule II, cannot be applied as these roads, poles or drainages are not for sale to probable buyers of plot. Neither their ownership nor their exclusive possession shall be passed on the probably buyers of plots, rather these are intended to be eventually vested with local authorities. The principal transaction is the sale of land and these amenities are a natural part of the sale of the plot of land and these do not, in anyway, change the nature of the land or of the transaction or activity being that of sale of land. As per entry 5 of Schedule III of SGST Act, sale of land and, subject to clause(b) of paragraph 5 of Schedule II, Sale of building, is the activity or transaction which shall be treated neither as a supply of goods nor a supply of services. Here it will be important to note that, the sale of building has conditions for the qualification to be covered in clause (b)of paragraph 5 of Schedule II. However, for sale of land, there is no such condition. Thus, land is excluded in entirety and in all circumstances whereas building is includable within the scope of supply only upon meeting certain specific criteria.

Summary

Issues Involved:
1. Whether the sale of plots is a supply.
2. If yes, whether it is a supply of goods or services and under which category it falls.
3. The valuation of the supply, if applicable.
4. Rate of tax as applicable.
5. Abatement, if any.

Issue-wise Detailed Analysis:

1. Whether the sale of plots is a supply:
The applicant, M/s. Shantilal Real Estate Services, sought an advance ruling to determine if the sale of plots constitutes a "supply" under the GST Act. The judgment clarified that the sale of land is excluded from the ambit of GST as per Serial no. 5 of Schedule III of the GST Act, which states that "activities or transactions which shall be treated neither as a supply of goods nor a supply of services" include the sale of land. The ruling emphasized that the sale of land does not involve the construction of any buildings or structures, and thus, it is not considered a supply under GST.

2. If yes, whether it is a supply of goods or services and under which category it falls:
Since the answer to the first issue was negative, the judgment concluded that there is no need to classify the sale of plots as either a supply of goods or services. The ruling reiterated that the sale of land is fully excluded from the ambit of GST law.

3. The valuation of the supply, if applicable:
Given that the sale of plots is not considered a supply, the question of valuation does not arise. The judgment stated that since the sale of plots is not a supply, there is no need to determine the valuation of such a transaction.

4. Rate of tax as applicable:
The judgment clarified that since the sale of plots is not a supply under GST, the question of applicable tax rates does not arise. The ruling explicitly stated that there is no applicable tax rate for the sale of plots.

5. Abatement, if any:
Similarly, the judgment concluded that since the sale of plots is not a supply, the question of any abatement does not arise. The ruling confirmed that there is no need for abatement in the context of the sale of plots.

Conclusion:
The ruling provided a comprehensive analysis, concluding that the sale of plots by M/s. Shantilal Real Estate Services is not a supply under the GST Act. Consequently, there is no need to classify the transaction, determine its valuation, apply any tax rate, or consider any abatement. The judgment emphasized that the sale of land is excluded from the ambit of GST law, as it is neither a supply of goods nor a supply of services.