Court Rules GST Payable on Two-Thirds of Construction Amount Excluding Land Value

The court ruled that in the case of supply of services involving construction of a complex or building for sale, GST is payable on two-thirds of the total amount charged, excluding the deemed value of land. The applicable GST rate is 9% CGST and 9% SGST. This ruling applies irrespective of the timing of the agreement, even if it is made after part of the construction is completed.

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Issues Involved:
1. Applicability of GST on the sale of undivided and impartible share of land.
2. Applicability of GST on the sale of superstructure (which is under construction).
3. Determination of the value on which tax is payable.
4. Applicable rate for charging GST.

Issue-wise Detailed Analysis:

1. Applicability of GST on the Sale of Undivided and Impartible Share of Land:
The applicant contends that the sale of land is outside the scope of GST as per Entry 5 of Schedule III of the CGST Act, 2017. This is supported by Section 7(2)(a) of the CGST Act, which states that activities specified in Schedule III are neither a supply of goods nor services. Consequently, the transfer of undivided and impartible share in land would not be leviable to GST. The judgment concurs, stating that the sale of land, including undivided portions, is an outright sale of immovable property and hence outside the scope of GST.

2. Applicability of GST on the Sale of Superstructure (Under Construction):
The applicant acknowledges that the construction of the superstructure attracts GST. According to Section 7(1)(d) of the CGST Act, read with Paragraph 5(b) of Schedule II, supply includes the construction of a complex or building intended for sale to a buyer, except where the entire consideration is received after the issuance of a completion certificate or first occupation. Therefore, if construction is done on behalf of the buyer, GST is payable.

3. Determination of the Value on Which Tax is Payable:
The judgment highlights that the supply in question is a composite supply consisting of land, goods used in construction, and services undertaken by the applicant. The value of the supply should exclude the value of land. Paragraph 2 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, deems the value of land to be one-third of the total amount charged. Thus, GST is payable on two-thirds of the total amount, which includes the consideration for goods and services.

4. Applicable Rate for Charging GST:
The applicable rate of GST on the two-thirds of the total amount is 9% CGST and 9% SGST as per S. No. 3(i) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017. This rate applies even if the agreement between the applicant and the buyer is entered into after part of the construction is already completed.

Ruling:
In the case of supply of services by way of construction of a complex, building, or civil structure intended for sale, GST is payable on two-thirds of the total amount charged, excluding the deemed value of land (one-third of the total amount). The applicable GST rate is 9% CGST and 9% SGST. This ruling applies regardless of whether the agreement is entered into after the construction has partially completed.

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