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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 ..... t 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 following questions; I) Whether GST is applicable on sale of developed plot of land for which consideration is received before the issuance of completion certificate (if any), under the following facts:- a) The sale of plot is after carrying out the development activities providing amenities such as drainage line, water line, electricity line, land leveling, and common facilities viz. road and street light etc. which are to be provided by BSCDCL; and b) remaining construction activities including civil foundation on the develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 The appellant has challenged the above referred ruling of the AAR mainly on the following grounds i. The ruling has given consideration to the definition of land only and ignored other associated factors like changing of the character of raw land to developed land. ii. The sale of developed land by BSCDCL is not just a case of sale of land, but is altogether a different transaction. In this transaction, the monetary value of the facilities provided like water, road, electricity supply line, drainage line etc. are included in the value of Developed Land. iii. The respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 development of plot to the buyers which was adjudged as failure to carry out the promise of service to the consumers, and is a beneficial legislation thus it would not be appropriate to apply the ratio of aforesaid case to decide an issue under taxation laws. ix) The respondent has contended that value addition in the sale price of the plot of land does not alter the basic character of transaction of sale of land. x) For the purpose of reference, the respondent has cited the ruling of the Authority for Advance Ruling, Kerala in the case of Dharmic Living (P) Ltd (2021- 131-taxmann.com 164), dated, 28.05.2021, the Authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expenses are as under: - S.No. Particulars Tender cost (Rs. 1 Grading and leveling of ABD area 6.99 2 Smart Road - Phase III, IV & V 111.06 3 Modular rain water harvesting 8.79 4 Water supply system 50 5 Automated Solid waste management system 20 6 ICT and street lighting 30 7 Landscape 50 8 Sewage line/ Water supply/ Electricity/ Transit house 25 9 Per Sq. meter development (Rs. Per sq. meter) 8511 6. DISCUSSION AND FINDINGS 6.1 We have carefully gone through the submissions made by the appellant in their appeal, their submission made at the time of personal hearing, and the submissions made by the original applicant M/s BSCDCL (i.e. the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction services. 6.6 With respect to GST, the tax is levied on supply of goods/services. In this regard, the respondent M/s BSCDCL, has made reference to clause (b) of paragraph 5 of Schedule II, of the CGST Act 2017, and also to Paragraph 5 of Schedule III of the CGST Act 2017. 6.7 Respondent has argued that "It is evidently clear that sale of land and sale of goods is outside the ambit of GST. Sale of land is totally outside the scope of GST, while sale of building can be taxed only as provided in para 5(b) of Schedule II". 7 The issues discussed above have been examined. In this case, the issue to be decided is whether GST is applicable on sale of developed plot of land and whether the activities undertaken for developing a barren land into a developed land with provision of amenities essential to make it inhabitable and fit for construction of a complex on the said land is a service and also whether it is a part of the service of construction of the complex and also whether this activity is covered under entry 5(b) of Schedule II of the CGST Act, 2017. 7.1 To understand this, first we have to understand whether Land, and developed Land are two different things. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale of plot by the respondent is after carrying out the development activities of providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc. which are to be provided by the respondent. Then, after calling for the bids, the land was transferred / sold to the successful bidder for a consideration of Rs.72.40 crores. During the course of personal hearing, and thereafter, the respondent was specifically asked to provide the details of expenses incurred by them for carrying out development activities in respect of the said plot of land. The respondent was also requested to provide the circle rate of land at the relevant time. The specific details, as called for, has not been provided by the respondent despite several opportunities, rather some figures, as claimed to be mentioned in the copy of the minutes of their Board meeting of the respondent corporation held on 12.11.2020 were provided without mentioning that this was the expense actually done towards development and also without mentioning the piece of land to which these expenses relate. The expenses on account of the above as intimated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value of the land and to change its character. Even though, while doing the development work, the ospective buyer was not known to the respondent, but whoever the buyer would have been, the respondent has offered him a service for a consideration which has Page been included in the price of the land. Just to say that when the buyer itself was not known at the time of developing the land how can a service be provided to him, is not acceptable as the inflated value of land, which was a result of development activity, was ultimately collected from the buyer. 7.5 Clause 'b' of para 5 of Schedule II of the CGST Act, 2017 is reproduced below: Schedule II 5. Supply of services The following shall be treated as supply of services, namely:- (b) 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. Explanation.- For the purposes of this clause- (1) the expression "competent authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spending huge amounts and subsequent to the amounts paid by the complainants also plots were developed. It pleaded that huge amounts were spent towards protection of the plots from the grabbers and developed roads, open drains, sewerage lines, streetlights etc. It is therefore, manifest that the transaction between the parties is not a sale simplicitor but coupled with obligations for development and provision of infrastructure. Inevitably, there is an element of service in the discharge of the said obligations. " 8.2 The Hon'ble Apex court observed that "the High Court was perfectly justified in holding that the activities of the appellant-company in the present case involving offer of plots for sale to its customers/members with an assurance of development of infrastructure/amenities, lay-out approvals etc. was a 'service ' within the meaning of clause (o) of Section 2(1) of the Act and would, therefore, be amenable to the jurisdiction of the fora established under the statute.... " 8.3 Thus it has been made amply clear by the Hon'ble Apex court in the above judgement that the legal position on the subject is fairly well-settled and the activity of Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply". Thus, the mechanism for quantification of service portion in transactions involving transfer of property in land has been clearly spelled out for levy of applicable GST. 10. In light of the above discussions and findings we are of the view that the AAR has not given due consideration to the crucial issues related to the difference between sale of barren land and developed land. Thus, the AAR in its order No 16/2021 dt. 22.11.2021 has erred in ordering 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 Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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