Karnataka AAAR Supports AAR In Case of GST Applicability on Plot Sales

The Goods and Service Tax (GST) is not applicable for consideration paid on sales of property plots, according to a recent ruling by the Karnataka Appellate Authority for Advance Ruling (AAAR) under GST.

In order to convert her three acres of property from agricultural to residential use, applicant Rabiya Kanum formed a small plot and sold it to private persons.

Whereas, in accordance with section 97 of the Central Goods and Service Tax (CGST), the applicant requested the Authority for Advance Ruling of Karnataka (AAR) to determine the GST applicability for the consideration received from the sale of the land plot.

The AAR determined that, in light of the sale of the land plot, GST was not applicable after carefully reviewing the applicant’s case.

The CGST officer with jurisdiction filed an appeal with the AAAR in opposition to this decision.

N Sundaram, an assistant commissioner, and appellant who is speaking on behalf of the department claim that the respondent built the site with the necessary infrastructure before selling it. Hence, the cost of the land and shared facilities are included in the sale price. Thus, the respondent’s activities fall within the category of construction services, and GST would be charged.

Read also: GST: 18% Duty May Be Charged On Transferring Plots in MIDC Industrial Estates

The applicant/respondent argued that in order to receive plan approval, the land must be developed. Also, officials would not permit the sale of the property without improving the site with essential services. As a result, entry 5 schedules III of the CGST Act did not apply to the sale of the developed property.

Also, the facilities attached to the site were not included in the sale price.

The AAAR, which was made up of members Ranjana Jha and Shikha C, dismissed the appellant’s appeal after carefully weighing the arguments of both sides and noted that,

Only the respondent’s approaches were the source of the appellant’s resentment. The responder was required to pay tax in these situations.

Read also: KA AAR: No GST Liability On Sale of Plots with Essential Infra

The department does not object to the decision that pursuant to entry 5 of Schedule III of the CGST Act of 2017, sales of plots after completion of the development work and after receipt of the completion certificate are exempt from GST.