Order Date – 30 September 2023

Facts –

• The Applicant, M/s. Vaishnaoi Infratech And Developers Private Limited, s engaged in the business of development of plots by purchasing the land from land owners or/and taking the land from other land owners by entering into development agreement.
• Applicant has owned 10 acres of land at Mamidipally Village near Shamshabad Airport, Hyderabad and in addition to that, they have taken another 12 acres of land located besides their land from other land owners by entering the joint development agreement.

Issue –

• Whether the sale of developed plots and development of plots’ service provided are liable to GST?

Order –

• The AAR observed that the activity of sale of land is covered as item (5) of the Schedule III to the CGST Act. The Circular No. 177/09/2022 dt:03.08.2022 issued by Government of India, Ministry of Finance, Department of Revenue ( Tax Research Unit) at para-14.3 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.
• Further the Circular clarified that any service provided for development of land, like leveling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services. Thus the supply of works contract service to customers as well as land owners, who have transferred the development rights to the applicant, is taxable at the rate of 9% CGST & 9% SGST as sub entry – xii of entry at serial no.3 with SAC 9954 of the notification 11/2017.
• The Transfer of Development Rights by the land owner to the applicant is taxable under the CGST & SGST Acts at the hands of the recipient promoter, i.e., the applicant, of these rights. The rate of tax is 9% on CGST & SGST respectively as residuary entry as mentioned in circular no.164/20/2021 dt: 06.10.2021 at Para no. 9.3.2. The applicant can claim input tax credit of the same while discharging the liability to pay tax on development services provided by him.