Land sold as plots attracts GST: AAR

New Delhi, June 21: GST will be levied on sale of land for which primary amenities such as drainage, waterline and electricity have been provided by a real estate developer, the Authority for Advance Ruling (AAR) has said.

The AAR has also concluded that sale of developed plots will be covered under the clause 'construction of a complex intended for sale to a buyer' and accordingly GST would be levied.

An applicant had approached the Gujarat bench of AAR to confirm if goods and services tax (GST) was applicable on the sale of plot of land for which, as per the requirement approved by the respective authority (i.e. jila panchayat), primary amenities such as, drainage line, water line, electricity line, land levelling are provided.

“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 plots...,” the AAR said.

The AAR, while passing the ruling, said the applicant sells the developed land as plots and the sale price includes cost of land, as well as price of amenities on a proportionate basis.

Rajat Mohan, senior partner at AMRG & Associates, said this ruling would have a direct, immediate, and adverse impact on the entire real estate sector, which intends to take away the tax-neutral status awarded to the sale of developed plots.

This ruling goes against the basic framework of GST, which restricts to the taxation of moveable goods and services. Constitutionally, GST cannot be levied on transactions in immovable property, Mohan said.