No GST on sale of plots with basic infrastructure: AAR

It was always clear that land is not subject to GST. However, an endless bout of litigation arose on whether sale of plots when some basic development has been carried out is subject to GST. This litigation is now easing. 

Mumbai, September 23,2022: The Karnataka bench of the GST-Authority for Advance Rulings (AAR) has held that goods and services tax (GST) is not applicable on sale of plots even if these are sold after completion of works related to basic necessities (such as land levelling, installation of sewage lines, et al).

It was always clear that land is not subject to GST. However, an endless bout of litigation arose on whether sale of plots when some basic development has been carried out is subject to GST. This litigation is now easing.

According to the reports published in realty.economictimes.indiatimes.com

Harpreet Singh, indirect tax partner at KPMG-India, said, “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. However, services availed of 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.”

Typically, plots are sold to individuals for building their own houses after some basic development has been carried out by the seller (land owner).

In this case, Rabia Khanum, an individual not registered under GST laws, sought to convert her land on the outskirts of Bengaluru into a residential site. She submitted that the land will be developed according to the regulations of the District Town and Country Planning Act.

The development of land includes formation of roads, rain water 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. Without providing these basic necessities, the authorities would not grant permission to sell plots to individuals for construction of houses.

Apart from seeking a reply on whether GST was applicable on the advance received/sale consideration for such sites, she also inquired 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.