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TMI Blog2022 (1) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... ice on 12.11.2020), it is found that the said sale deed does not pertain to the appellant but pertains to sale of developed land between Shri Manishbhai Bhavaniprasad Agrawal and Shri Denishbhai Dhanrajbhai Shah, both partners of Swami Developers(the sellers) and Shri Nevil Bharatbhai Doctor(the purchaser) which is not in any way related to the appellant - the said documents/papers submitted by the appellant as well as those parts of the submissions of the appellant that are based on the clauses of the attached sale deed, cannot be relied upon in the present case. When the transaction involves mere sale of land, the said transaction will be out of the scope of supply and will be squarely covered under Entry No.5 of Schedule-III which covers activities or transactions which shall be treated neither as a supply of goods nor supply of services. However, in view of the common facilities being developed/being got developed by the appellant, this activity will be squarely covered under the scope of taxable service i.e. construction of civil structure or a part thereof, intended for sale to a buyer. under clause(b) of paragraph 5 of Schedule-II of the CGST Act, 2017 - the sale of dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual plots to different buyers without any construction on the same but by providing the primary amenities as mentioned above, which are mandatory requirements of the approved Plan Passing Authority (the Jilla Panchayat). The appellant had filed an application for Advance Ruling on the above matter with the Gujarat Advance Ruling Authority asking the following question seeking Advance Ruling: Whether GST is applicable on sale of plot of land for which, as per the requirement of approval by the respective authority (the Jilla Panchayat), primary amenities such as, Drainage line, water line, electricity line, land leveling etc. are to be provided by the applicant? 2. The Gujarat Authority for Advance Ruling (hereinafter referred to as GAAR ) has ruled that GST is applicable on sale of plot of land for which, as per approval of the respective authority (the Jilla Panchayat), primary amenities such as, Drainage line, water line, electricity line, land leveling etc. are to be provided by the applicant, on the following grounds: (i) Entry 5 of Schedule-III of the CGST Act covers sale of land which is excluded from GST and reads as under: 5. Sale of land and, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er clause 5(b) of the Schedule-II of the CGST Act, 2017, construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer is a Supply of service and, hence, is liable to the Goods and Services Tax(GST). (vii) The activity of sale of developed plots would be covered under the clause construction of a complex intended for sale to a buyer . Thus, the said activity is covered under construction services and GST is payable on the sale of developed plots in terms of CGST Act/Rules and relevant Notification issued from time to time. 3. Aggrieved with the aforesaid ruling, the appellant has filed the present appeal on 31.08.2020 and has submitted the statement of facts as under: (i) The appellant is a farmer engaged in agricultural activities and has proposed business activities on a vacant land that he is having. The land is situated outside the municipal area of town and the appellant is having all the necessary approvals for the proposed project from the plan passing authority i.e. the Jilla Panchayat. (ii) As per point no. 6 of the conditions stated in the Plan approval letter, the appellant is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of creating their own AOP or by way of any other constitution. 4. The appellant has submitted the grounds of appeal as under: (i) Their representative Dr. Avinash Poddar, Advocate during the course of hearing reiterated the submissions given in the application and argued that as per the agreement, the common facilities will not be sold to the plot holders and the appellant will not develop the same. On this, the Advance Ruling Authority had asked to submit a detailed written submission mentioning the facts but due to Covid 19, the representative asked for some time for the submission of the detailed written submission. (ii) Due to Covid-19 situation, Hon ble Supreme Court has issued an order dated 23rd March, 2020 declaring that the period from 15th March, 2020 till further orders, shall not be taken into consideration for counting the period of limitation under any general or special laws. (iii) Notification No.35/2020-Central Tax dated 03.04.2020 has extended the due date of compliance which falls during the period from 20.03.2020 to 29.06.2020 to the 30th day of June, 2020 (which also includes filing of appeal). (iv) The appellant had requested the Advance Rulin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. As per Section 8 of CGST Act: 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. Schedule-III Paragraph 5 of CGST Act states: As per entry 5 of the Schedule III relating to Activities or transactions which shall be treated neither as a supply of goods nor a supply of services which reads as under: Sale of land and, subject to clause(b) of paragraph 5 of Schedule II, sale of building. The appellant has stated that on combined reading of the above provisions it is understood that, sale of land is excluded from the scope of supply under Entry No.5 of Schedule III. Further, the appellant submits that expressions composite supply and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply, and other supplies become incidental or ancillary to the predominant supply i.e. in the present case, supply of land is the predominant supply. (xi) Appellant has relied upon the following judicial precedent as well, in this regard wherein the said view has been upheld and has attached copy of said case law: The Authority for Advance Ruling (AAR), Karnataka, in the case of Maarq Spaces pvt.ltd. (Order No.KAR ADRG/199/2019) has said that where merely land development activities are undertaken under a JDA, the same are likely to be taxed under GST, however where development of land is naturally bundled with sale of land and sale is the principal supply in the bundled transaction, the transaction may be construed as composite supply not liable to GST. (xii) The proposed activity of the seller of land includes selling of exclusive plot to individual buyers with a condition to construct common facilities by the buyers by creating their own AOP of which all the Plot holders shall be members. Hence, there is no justification in charging GST where no construction or services took place on sale of land as it falls under paragraph 5 of Schedule III of the CGST Act as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such kind of project is not exponential/higher in comparison to the total project value and not more than approximately 30%-35% of the area out of total area is being utilised for such common facilities like drainage, approach roads etc, therefore, even if the appellant presumes and accepts the contention that it is a construction activity, then also levying tax on the total value seems to be highly unjustifiable and illegal. (vi) The appellant has concluded his submission by stating that the prime activity in the present case is of sale of Land which is squarely covered under Entry 5 of Schedule-III and therefore, order of the Authority of Advance Ruling needs to be set aside. 6. There has been change in one of the two Members of this authority consequent upon the transfer and posting of the Chief Commissioner, Gujarat Goods and Services Tax, after Personal Hearing has been held in this case. The appellant was therefore asked whether they require fresh hearing or not. The appellant vide their mail dated 02.12.21 informed that they would like to be heard again. Accordingly, personal hearing in the matter was held on 09.12.21 wherein the appellant requested time for makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns given by the appellant after the personal hearing as well as evidences available on record. We have also gone through the Ruling given by the GAAR. 8. The appellant, in their application for Advance Ruling had asked the GAAR whether GST was applicable on sale of plot of land for which, as per the requirement of approved plan by the respective authority (the Jilla Panchayat), primary amenities such as, Drainage line, water line, electricity line, land leveling etc. are to be provided by the appellant. GAAR vide their Advance Ruling No. GUJ/GAAR/R/2020/11 dated 19.05.2020 had ruled that GST was applicable on the same. The appellant has challenged the said order by filing this appeal against the aforementioned order of GAAR. 9. Further, as per the submission of the appellant, they had filed the appeal against the order of the Authority for Advance Ruling(AAR) bearing No.GUJ/GAAR/R/2020/11 dated 19.05.2020, on 31.08.2020. The appellant has made a reference to Notification No. 35/2020-Central Tax dated 03.04.2020 which provides for extension of time limit for compliance (including filing of appeal) whose due date falls between 20.03.2020 to 29.06.2020 till 30.06.2020, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to make with the individual buyers of their plots of land. In fact, on going through the copy of sale deed (marked as Annexure-VII) which the appellant has submitted along with their additional submission dated 10.11.2020 (received in this office on 12.11.2020), it is found that the said sale deed does not pertain to the appellant but pertains to sale of developed land between Shri Manishbhai Bhavaniprasad Agrawal and Shri Denishbhai Dhanrajbhai Shah, both partners of Swami Developers(the sellers) and Shri Nevil Bharatbhai Doctor(the purchaser) which is not in any way related to the appellant. Therefore, the said documents/papers submitted by the appellant as well as those parts of the submissions of the appellant that are based on the clauses of the attached sale deed, cannot be relied upon in the present case. In view of the above, the discussion/decision in respect to the issue in hand will be solely based on the submissions of the appellant, the available records and merits of the case. 12. We find that the appellant in written submission dated 17.12.2021 has made contradictory submissions wherein it has been stated that the sale of plot is after carrying out the develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforementioned facilities are to be invariably developed by the appellant only, before selling the plots to their buyers. (iii) On the one hand, the appellant is claiming that he will neither charge anything from the buyers towards development of the common facilities nor charge anything towards allowing the buyers to use such common facilities whereas on the other hand, the appellant is compelling the buyers to make payment for development of such common facilities (through an agreement) to another entity (Association of Persons or some other artificial judicial person)which would carry out the work of development of such common facilities, which otherwise were required to be developed/provided by the appellant. Thus, it appears that this is not a simple agreement of sale of land but a conditional agreement of sale wherein the buyers are required to do several other things, apart from making payment for land to the appellant. (iv) The appellant in his application for Advance Ruling has asked Whether GST is applicable on sale of plot of land for which, as per the requirement of approval by the respective Authority (i.e. Jilla Panchayat), primary amenities such as Drainag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their contention that the common facilities are to be developed by the individual buyers by forming an AOP and that the entire expense of the development of the common facilities mentioned hereinabove is to be borne only by the appellant (which they are not charging or taking from the individual buyers), we have no option but to believe that the rate/amount charged by the appellant from the individual buyers of their plots includes the amount spent towards the construction of common facilities, irrespective of the fact as to whether the common facilities were developed by the appellant or the individual buyers through formation of an AOP. Further, irrespective of the fact as to whether the appellant develops the common facilities and then sells the plots of land OR makes an agreement with the buyers of the plots of land mandating them to develop the common facilities by forming an AOP or some other artificial judicial person, it will still be considered a sale of developed land only, since the plan approval authority clearly mandates development of common facilities in the land, prior to it s sale. Even otherwise, such charges are to be included in the value of supply as per the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation . For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. (3) The value of the supply shall not include any discount which is given (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) after the supply has been effected, if- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. 13.4 As can be seen from the above, the only thing that gets excluded from the value of supply of services or supply of goods are the discounts as per 3(a) and 3(b) of Section 15 of the CGST Act, 2017. Thus, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med that the common facilities are developed by the appellant, then also it is certainly getting covered in the ambit of composite supply; that the transaction undertaken by the appellant involves two supplies i.e. (a) Sale of land and (b) Development and provision of common facilities like drainage, electricity line, compound wall, etc. only because it is mandated by the plan passing authority. The appellant has stated that the common facilities developed on it is squarely falling under the transaction of sale of land and hence the entire supply of land being a Composite Supply, is neither supply of goods nor supply of services and in such cases, the taxability and the rate of tax is decided on the basis of the predominant item in that supply, which, in this case, is the sale of land and therefore the development of basic common facilities are the ancillary supply. The appellant has concluded his submission by stating that the prime activity in the present case is of sale of Land which is squarely covered under Entry 5 of Schedule-III and therefore, order of the Authority of Advance Ruling needs to be set aside. 14.1 To look into the aspect of composite supply as submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under Entry 5(b) of Schedule-II of the CGST Act, 2017 i.e. Construction of Civil Structure or parts thereof intended for sale to a buyer and is a supply of taxable service. Therefore, since there is only one supply of taxable service involved in the said transaction (the other being neither a supply of service nor supply of goods), this condition is also not satisfied. (iii) Since there is only one supply of service involved in the aforementioned transaction, the question of being naturally bundled or supplied in conjunction with each other does not arise. Hence this condition is also not satisfied. (iv) Since there is only one supply of service involved in the aforementioned transaction, there is no principal supply or ancillary supply. Hence, this condition is also not satisfied. In view of the above, since none of the above conditions have been satisfied, we conclude that the aforementioned supply, as submitted by the appellant, cannot and does not constitute a composite supply . 15. We find that the plotted development is a scheme which involves forming land into layout after obtaining necessary plan approval from the Development Authority, getting all oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plots would be covered under the clause construction of civil structure or a part thereof, intended for sale to a buyer . Thus, the said activity is not covered under Entry No.5 of Schedule-III of the CGST Act, 2017 as contended by the appellant, but it is a supply of taxable service involving construction of civil structure or a part thereof, intended for sale to a buyer falling under the head Construction services appearing at Sr.No.3 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) and GST at the rate of 18% is payable on the sale of developed plots in terms of CGST Act, 2017 and Rules thereunder. 16. We find that the appellant has relied upon Order No.KAR ADRG/199/2019 issued by the Authority for Advance Ruling(AAR), Karnataka in the case of Maarq Spaces pvt.ltd to support their contention. We also find that the appellant has also relied upon Order No. 16/2021 dated 22.11.2021 issued by the Authority for Advance Ruling (AAR), Madhya Pradesh in the case of M/s. Bhopal Smart City Development Corporation Ltd., in support of their contention. In this regard, we have to emphasize here that decisions of Advance Ruling Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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