New Delhi: Goods and services tax (GST) will not be applicable on sale of plots even after basic infrastructure work like land levelling, installation of sewage lines, etc. is done on them. The Karnataka bench of the GST-Authority for Advance Rulings (AAR) maintained this in a recent ruling.
It was always clear that land is not subject to GST. However, litigation in huge numbers sought clarity on whether sale of plots after the completion of basic development is subject to GST.
Read More: Debit Card, Credit Card Tokenisation: PayU Tokenises Over 50 Million Cards as Deadline Nears
The basic infrastructure works done on plots include formation of roads, rainwater drains, laying of electricity cables, water pipes, sewerage lines, drilling of bore-wells, setting up of a power sub-station and obtaining connection from the electricity board.
Authorities can’t grant permission to sell plots to individuals for construction of houses without these basic necessities. The Karnataka AAR clarified this while hearing the case of Rabia Khanum, an individual not registered under GST laws. She sought to convert her land on the outskirts of Bengaluru into a residential site and submitted that the land will be developed according to the regulations of the District Town and Country Planning Act.
Khanum sought a reply on whether GST would apply on ‘sale of plots after completion of works related to basic necessities’, and obtained a favourable reply of its non-applicability. She had also inquired about whether tax was applicable on the advance received/sale consideration for such sites.
“This advance ruling follows the circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on August 3, after the GST Central Council meeting. This circular states that even sale of plots after some basic development has been carried out is sale of land per se and is not subject to GST,” Harpreet Singh, indirect tax partner at KPMG-India, told ToI.
However, services availed for developing the land — such as land levelling, laying of drainage lines, etc — will attract GST. CBIC’s clarification and this advance ruling clear the air as regards GST applicability on sale of land, he noted further.
