The Madhya Pradesh High Court has asked the local authority to reconsider its decision to levy 12% GST on a piece of land.
The petitioner, Ms. Shraddha Tiwari approached the Court contending that GST at 12% has been levied upon the sale consideration for the purchase of developed land upon the petitioners who happen to be purchasers of the said land from Bhopal Development Authority.
Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and accordingly does not attract GST. However, any service provided for development of land shall attract GST at applicable rate.
GST brought to the Court’s attention a circular dated 03.08.2022 issued by the Government of India, Ministry of Finance, Department of Revenue, clarifying applicable GST rates and exemptions on certain services, which inter alia provide (Point 14 of Circular No. 177/09/2022):
- Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST:
14.1 Representation has been received requesting for clarification regarding applicability of GST on sale of land after levelling, laying down of drainage lines etc.
14.2 As per Sl no. (5) of Schedule III of the Central Goods and Services Tax Act, 2017, ‘sale of land’ is neither a supply of goods nor a supply of services, therefore, sale of land does not attract GST.
14.3 Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST.
14.4 However, it may be noted that any service provided for development of land, like levelling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services.
The issue was discussed during the 47th GST Council Meeting and in a welcome move the issue was clarified by CBIC that no GST would be applicable on sale of levelled land means after completion development activity, GST would not be applicable even on development portion from the total value of consideration.
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