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TMI Blog2022 (7) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale of land is also not valid and is not supported by any logical reasoning. In fact value addition of the scale, as seen in this case, substantially magnifies the usability of land. The respondents have also placed reliance on certain rulings of AAR in different cases but in terms of Section 103 of the CGST Act, such rulings cannot be relied upon as they are applicable to the applicant and the jurisdictional officer only. It is evident that for the development of plots, the respondent has undertaken the activities of Grading and leveling of ABD area, construction of roads, modular rain water harvesting, water supply system, automated solid waste management system, ICT and street lighting and sewage line/ water supply/ electricity/ transit house. On account of these activities relating to development of barren land into developed land, huge sum of money amounting to Rs. 301.84 crores has been spent, which appears to be a major and substantial chunk of the cost of project. The complex which is going to be built on this land either for residential or commercial use cannot be imagined without these basic development activities. Thus it would be apt to derive that these activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Goods and Service Tax Act, 2017 and the Madhya Pradesh Goods and Services Tax Act, 2017 [hereinafter also referred to as [ the CGST Act and MPGST Act ] by Sh. Atul Shrivastava, Deputy Commissioner, State Tax Circle - I, Bhopal, (hereinafter also referred to as the appellant ) against the order No. 16/2021 Dt. 22.11.2021 passed by the Authority for Advance Ruling, Madhya Pradesh, and the appeal is deemed to be an appeal under Section 100 of CGST Act and MPGST Act. Since the provisions of both - the CGST Act and the MPGST Act are mirror image of each other except for certain specific provisions, therefore unless a specific mention is made to any dissimilar provisions, a reference to the CGST Act would mean a reference to the Page 1 of 16 similar provisions under the MPGST Act and vice-versa. At places we may refer it as GST Act. 2. BRIEF FACTS OF THE CASE M/s Bhopal Smart City Development Corporation Limited (hereinafter referred to as 'BSCDCL'), Zone - 14, Bhopal Municipal Corporation, BHEL Govindpura, Bhopal - 462023, had submitted application u/s 97(1) of CGST Act MP GST Act seeking Advance Ruling from the Authority for Advance Ruling, Madhya Pradesh, on the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion certificate is required for the project) for the reasons stated above, it is ruled that 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. 8.2 In respect of the other questions raised, in light of the ruling regarding Question - I, they have become redundant and therefore no ruling is required to be passed in respect of other questions raised. 8.3 The ruling is valid subject to the provisions under section 103 (2) until and unless declared void under Section 104 (1) of the GST Act. Being aggrieved by the said ruling of the AAR, the jurisdictional officer has 1 /2021/1434 dt. 23.12.2021. 4. QUESTIONS RAISED BEFORE THE APPELLATE AUTHORITY FOR ADVANCE RULING (AAAR) 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veloped or not, cannot be taxed under the provisions of GST. v) The respondent also made reference to Para No. 2 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, Section 2(k) of MP Land Revenue Code, 1959 to contend that the development work on the plot of land being sold is also subsumed in land itself and the development work have no separate entity. vi) The respondent also made reference to section 15(2) of CGST Act, to contend that anything done by the supplier i.e. development work at the time of delivery of services of goods, is part of value of supply. vii) The respondent also made reference to para 5 of Schedule III of CGST Act to contend that the sale of land is outside the ambit of GST and sale of building can be taxed only as provided in para 5(b) of Schedule II. viii) On the issue of reliance of the appellant on the decision of Hon. Supreme Court of India in the case of M/s Name Construction Pvt. Ltd. Vs. Union of India (2013-29-STR3), the respondent has argued that the said judgment has been given in the context of section 2(1 )(0) of the Consumer Protection Act, 1986 where the builder has failed to carry out the promise of dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The allotment of plot was made to the successful bidder who participated in the tender for allotment of plot No.79(B) on freehold basis for ABD Area of Bhopal Smart City Development Corporation Limited. 5. As regards the price on which the land was allotted to Bhopal Smart City Development Corporation Limited (BSCDCL), they submitted that a total of 342 acres of land was allotted to BSCDCL on a free hold basis, vide order dated, 23.05.2017 and the land was transferred without any cost. 5.3 During Personal hearing the respondent was requested to provide details of expenses incurred for carrying out the referred development activities, which was not provided by the respondent. A letter dt. 23.3.2022 was sent to the respondent to provide these details and also to inform the circle rate of the land at relevant time. Reply from the respondent was received vide their letter dt. 11.04.2022, wherein although they did not provide the prevailing Circle rate at the relevant time but informed that from the perusal of the minutes of the Board meeting of the respondent corporation held on 12.11.2020 it could be observed that the total expenses incurred under various heads of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line, drainage line etc are included in the value of Developed Land but this aspect has not deliberated by the AAR. Accordingly the appellant has argued that this transaction falls under entry No. 5 (b) of Schedule II of the CGST Act 2017 and it attracts GST under construction services . 6.4 The respondent M/s BSCDCL has made arguments in its defence, contending on various grounds that GST is not applicable on sale of Developed land in their case. The main contentions of the respondent are discussed here in below - 6.5 The respondent has argued that the appellant mentioned that there is difference between plot of land and developed plot of land. In the developed plot of land, there is value addition due to addition of facilities, such as water, road, electricity lines, drainage lines etc. It is further mentioned in the said grounds that there is no sale of land, but there is sale of land along with development work. The development work is a separate project, apart from land. The appellant has further contended that the sale of developed plot is supply of service as per para 5(b) of Schedule II of CGST Act. The respondent argued that the appellant has failed to appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 79B, is a part of construction of the complex which is being developed thereon. The interpretation that only such building can be taxed where there is requirement of issuance of completion certificate, is also faulty and is not supported by the provision. The contention of the respondent that value addition in the sale price of the plot of land does not alter the basic character of transaction of sale of land is also not valid and is not supported by any logical reasoning. In fact value addition of the scale, as seen in this case, substantially magnifies the usability of land. The respondents have also placed reliance on certain rulings of AAR in different cases but in terms of Section 103 of the CGST Act, such rulings cannot be relied upon as they are applicable to the applicant and the jurisdictional officer only. 7.2 This appeal relates specifically to plot No. 79 (b) [Area: 9,650.30 Sqm. (0.96503Ha.)] which is located at Khasra No. 116 119, Gram Kotra Sultanabad, Patwari Halka T.T. Nagar, Tehsil Huzur, District Bhopal. In this case the respondent, vide their letter 15.3.2022, have submitted that the said land was allotted to them free of cost. As per Question No. 1 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided, but still the original value of the said plot of land without development activities and the expenses incurred towards its development activities is not known. Only fact, as intimated by the respondent, is that the said plot of land was sold to the successful bidder for a consideration of Rs. 72.40 crores. 7.3 From the above reply of the respondent it is evident that for the development of plots, the respondent has undertaken the activities of Grading and leveling of ABD area, construction of roads, modular rain water harvesting, water supply system, automated solid waste management system, ICT and street lighting and sewage line/ water supply/ electricity/ transit house. On account of these activities relating to development of barren land into developed land, huge sum of money amounting to Rs. 301.84 crores has been spent, which appears to be a major and substantial chunk of the cost of project. The complex which is going to be built on this land either for residential or commercial use cannot be imagined without these basic development activities. Thus it would be apt to derive that these activities have been undertaken with the aim of developing the land into a compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or town or village or development or planning authority; (2) the expression construction includes additions, alterations, replacements or remodelling of any existing civil structure; 7.6 In light of the provisions of clause 'b' of para 5 of Schedule II of the CGST Act, 2017 and also in light of the above discussions, we are of the opinion that this transaction squarely falls under clause 'b' of para 5 of Schedule II of the CGST Act, 17 as the process of developing a plot of land by providing amenities such as age line, water line, electricity line, land leveling, and common facilities viz. road and street light etc. are preparatory part of the activity of construction of whatever structure that is proposed to be constructed on that piece of land. 8. In its judgement in M/s Name construction P. Ltd. in Civil Appeal Nos. 4432-4450 of 2012, the Hon'ble Supreme court has discussed the issue of difference between virgin land and developed land, and the element of Service provided on account of this development. Even though this judgement deals with the definition of 'service' under the Consumer Protection Act, 1986, but the issue discussed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Description of Service Rate (per cent.) Condition (1) (2) (3) (4) (5) 3 Heading 9954 (Construction services) (i) Construction of a complex, building, civil structure or a 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. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 9 (ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017. 9 (iii) construction services other than (i) and (ii) above. 9 - 2. In case of supply of service specified in column (3) of the entry at item ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such sale . Accordingly we quash the order No 16/2021 dt. 22.11.2021 passed by AAR, Madhya Pradesh, Indore. 10.1 In view of the above, we are of the opinion that the activity of the sale of developed land is covered under 'construction of a complex intended for sale to a buyer' and is thus covered under 'construction services' and GST is payable on the sale of such developed land in terms of CGST Act / Rules and relevant Notification issued from time to time. Having regard to the facts and circumstances of the case and discussions as above, we dispose of the instant appeal filed by Sh. Atul Shrivastava, Deputy Commissioner, State Tax Circle - I, Bhopal, the Appellant, by passing the following order: ORDER 11.1 The activity of purchase or allotment of land and selling the said land after undertaking development activities of providing amenities such as Drainage line, water line, electricity line, land leveling, and common facilities viz. road and street light etc. is liable to GST. 11.2 The activities of the respondent, M/s Bhopal Smart City Development Corporation Limited will fall under the clause (b) of paragraph 5 of Schedule -II of Madhya Prades ..... X X X X Extracts X X X X X X X X Extracts X X X X
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