Land deals are exempted from goods and services tax (GST) as ruled by the Authority for Advance Rulings (AAR), Telangana except for the works contracts within the agreement of the buyer and seller.
The work contract comes under the service contractor which might indeed consist of the supply of goods in the implementation of the agreement. It is normally a composite supply of the dual service which might consist of the supply of goods under GST towards the implementation of the agreement.
The council held that the case concerned the agreement amid TIF integrated industrial parks (TIFIIP) and the Telangana State Industrial Infrastructure Corporation (TSIIC), mentioned by Sandeep Sehgal, director, tax and regulatory, AKM Global, a tax and consulting firm.
TIFIIP comprises a company made through the industrialists as needed through the TSIIC as a special purpose vehicle (SPV) showing the member industrialists. The same poses an intention to furnish the industrial infrastructure through the development of the land which the association has taken. TSIIC provides the final allotment letter mentioning that 377 acres of the land of Rs 55.11 cr which is located on Vijayawada Highway to develop the industrial corridor.
A sale agreement was performed amid TIFIIP and TSIIC however the same shall be implemented on the finish of the development of the internal infrastructure. TIFIIP seeks to find out from Authority for Advance Rulings (AAR) if the sale agreement could urge GST.
AAR held that the activity performed through the applicant for the construction upon the immovable property will entitle to be the work contract if it is operated under the pursuance of a contract or agreement; property transfer in the doing of a works agreement via contractor to the contractee, and there is a consideration furnished through the contractee to the contractor.
AAR mentioned that the applicant who inserted the pursuit of contract in the TSIIC has shown that the property in the land shall be transferred to the application upon the condition that the TIFIIO finishes the construction of the land which is undertaken for development. But the same clause in the agreement seems to be built so as to meet the bigger objective as numbered in the industrial policy of the state.
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However, there is a contract for the development of the land with the additional conditions mentioned that the transfer of the property via application to the TSIIC along with the payment of the consideration performed via TSIIC to the applicant does not get furnished. There is no GST inside the same case they mentioned.
But post the construction of the land, if the application sells it through the method of building the structure of civil or complex the same shall be subjected to tax beneath GST laws.
“Sehgal told that Telangana AAR has looked into the substance of the transaction and held that the essential element of a transaction is the sale of land and it will not be subject to GST.”
