The applicant was unregistered Individual under GST who owned 3 acres of land in Chitradurga District, Karnataka. The applicant applied for permission from Government Authorities to convert the land for residential usage.
The applicant developed the land as per regulations of the District Town and Country Planning Act. The development of Land included formation of roads, rainwater drains, installation of electricity cables, water pipes, sewerage lines, borewells for supply of water, construction of water tank for storage and supply of water, setting up of a power sub-station and establishment of connection from Electricity Board for supply of electricity, etc.
Without providing these basic amenities, the concerned authorities would not grant permission to sell the plots to a third party for the purpose of the construction of houses.
The applicant sought an advance ruling for the following questions:
- Whether GST would be applicable for the consideration received on the sale of sites? If yes at what rate and on what value?
- Whether GST would be applicable for the advance received towards sale of sites? If yes at what rate and on what value?
- Whether GST would be applicable on the sale of plots after the completion of works relating to basic necessities?
- If GST would be chargeable on any of these transactions, could the applicant collect the GST from the prospective buyers?
- If GST would be chargeable on any of these transactions whether the applicant is eligible for claiming the Input Tax Credit that they pay on the expenses, they incur on development?
At the outset, the Karnataka AAR analysed whether the sale of sites/plots with basic necessities would fall under Entry No. 5 of Schedule III of the CGST Act, 2017. Referring to the CBIC circular no. 177 dated 03/08/2022, the AAR held that the sale of developed land is also the sale of land and is covered under Entry No. 5 of Schedule III of CGST Act, 2017. Accordingly, AAR concluded that the sale of site from developed land will not attract GST.