QUESTION

Query in relation to recent AAR of Gujarat Advance ruling authority in the case of Shree Dipesh Anilkumar Naik, wherein the authority has concluded that Sell of land with basic amenities which as per the approved plan of the seller is to be provided, the said transaction is a service transaction and liable for GST. My queries are: 1. Whether the ruling provided by authority is correct as this is nothing but a composite supply and principal supply here is sale of land only so whether GST should be levied? 2. As per RERA project definition the sale of developed land is a real estate project. So whether simply converting a land in to small plots and selling without any basic amenities liable for GST? 3. If it is liable for GST then at what rate i.e. at service rate? and whether land value deduction will be allowed 1/3rd? Kindly clear the above issue.

ANSWER

Facts of the case: Gujarat Advance ruling authority in the case of Shree Dipesh Anilkumar Naik, has concluded that Sell of land with basic amenities which as per the approved plan of the seller is to be provided, the said transaction is a service transaction and liable for GST. Whether GST is applicable on sale of developed land with basic amenities.

Law applicable:
SCHEDULE II OF CGST ACT
5. Supply of services

 The following shall be treated as supply of service, namely:'

(a) =======
(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" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:'

            (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

            (ii) a chartered engineer registered with the Institution of Engineers (India); or

            (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

Interpretation: At the time of issue of AAR some material facts are ignored.  The land owner is doing development of land belongs to him and sold it thereafter.
If no advance payment is received or booking of plots is done before the development is completed then it should not be considered as work contract service. The owner is doing self service, it is not a service provided by one person to other There is no receiver, so the basic component of the supply is missing.
 
Accordingly it merits to be challenged.

Suggestion: The development of land  does not require any completion certificate it simply require permission or NOC from the local authority. So take a safeguard and take a certificate from any of the persons mentioned in explanation above, after the certificate is issued the transaction will be not considered as construction service(Reply dt.22-06-2020)