2018 (10) TMI 1868 - AAR - GST

Developer receives 20% plot share as consideration for township development services subject to 18% GST as works contract

AAR Haryana ruled on GST applicability for township development transactions. The authority held that booking/sale of developed plots by applicant and ... Levy of GST - booking/selling of plots to be done by The Applicants and Land owners during the development (before completion of the development work of the township) of the township - share of licensed plotted area agreed to be provided by the land Owners to the Applicant (developer) - Taxable value - rate of tax. Booking/sale of developed plots by the Applicant and the land owners - HELD THAT:- It amounts to sale of land and the understanding of the Applicant of the law regarding this aspect of the transaction is correct. From the conjoint reading of Section 7 and Paragraph 5 of Schedule III of SGST/CGST Act, any activity/transaction in the nature of “Sale of Land” is not covered with in the preview of GST, hence no GST is payable on the transaction resulting in the sale of lands. Transaction of transferring 20% share of their plots by the landowners to the Applicant - HELD THAT:- The question is itself answered in the querry of the Applicant that it is consideration for the works contract services rendered by the Applicant and therefore, we do not agree with the understanding of law by the Applicant on this part of the transaction. The transfer value of the plots will be considered as consideration paid by the land owners for the services rendered by the Applicant for development of their land and will be regarded as 'works contract, services attracting 18% GST. Issues involved:1. Applicability of GST on booking/selling of plots during township development.2. Applicability of GST on 20% share of licensed plotted area provided by land owners to the developer.Detailed Analysis:1. Applicability of GST on booking/selling of plots during township development:The Applicant sought an advance ruling on whether GST would apply to the booking/selling of plots during the development phase of a township. The Applicant argued that since the transaction involves the sale/transfer of land, it falls outside the purview of GST as per Section 7 and Paragraph 5 of Schedule III of SGST/CGST Act. The Authority agreed with the Applicant's interpretation, stating that any activity related to the sale of land is not subject to GST. Therefore, the booking/selling of plots by the Applicant and land owners during township development would not attract GST, regardless of whether it occurs before or after completion of the development work.2. Applicability of GST on 20% share of licensed plotted area provided by land owners:The second issue raised was whether GST would apply to the 20% share of licensed plotted area transferred by the land owners to the developer. The Applicant contended that this transfer constituted a sale of land and thus should not be subject to GST. However, the Authority disagreed, stating that this transfer was part of a works contract service provided by the developer. The transfer value of the plots was considered as consideration for the services rendered, attracting an 18% GST rate (9% CGST + 9% HGST). The Authority clarified that this transfer was independent of the sale of land and should be treated as a works contract service subject to GST.In conclusion, the Authority ruled that while the booking/selling of plots during township development would not attract GST as it involves the sale/transfer of land, the transfer of the 20% share of licensed plotted area by the land owners to the developer would be subject to GST at an 18% rate as it constituted a works contract service.