The Authority of Advance Ruling (AAR), Gujarat, has ruled that GST (Goods and Services Tax) will apply to the sales of developed land sold as plots by any real state developer on which basic amenities like electricity, drainage and waterline are provided. The authority has also said that such transactions, including the sale of developed plots, will be included under the ‘construction of a complex intended for sale to a buyer’ of GST and so GST will be charged accordingly.
The application was made before the Gujarat authority in which the applicant sought the ruling of the AAR on the applicability of GST on the sale of developed plots with amenities like electricity, drainage and waterline, etc. are provided, as approved by the Zila Panchayat.
“We find that the activity of the sale of developed plots would be covered under the clause ‘construction of a complex intended for sale to a buyer’. Thus, the said activity is covered under ‘construction services’ and GST is payable on the sale of developed plot.” the AAR said. The authority informed that the price at which the sales have been made are inclusive of the cost of the land as well as that of the amenities provided on the proportionate basis.
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Rajat Mohan, a Senior Partner at AMRG & Associates, said that the decision will have a reverse impact on the sales in the whole real estate industry, directly. The status of tax neutral status of the sale of developed plots will be taken away as a result of the decision.
“This ruling goes against the basic framework of GST which restricts to the taxation of movable Goods and services. Constitutionally, GST cannot be levied on transactions in immovable property, and this ruling may not even hold any ground in higher forums,” Mohan said.
