Works contract valuation in joint development: revenue share from plot sales is taxable consideration for development services.
A joint development arrangement for plotting land and providing roads, drainage, gardens, electricity and allied infrastructure was treated as a taxable supply of works contract services, because the developer did not acquire title to the land and merely carried out development on behalf of the landowner. The sale of plots was incidental to that development activity and did not amount to sale of land under Para 5 of Schedule III. For valuation, the agreed 40% share of plot sale proceeds was the developer's consideration. Rule 31 of the GST Valuation Rules applied, read with section 15 of the CGST Act, so the taxable value was the amount received or receivable under the revenue-sharing arrangement.
Issues: (i) Whether the development activity undertaken under the joint development agreement, including construction of roads, drainage, garden, electricity infrastructure and allied works for plotted land, falls within Para 5 of Schedule III as sale of land or is a taxable supply of services under works contract. (ii) Whether the value of supply is to be determined under Rule 31 of the GST Valuation Rules and whether the amount equal to 40% of the sale value of plots constitutes the taxable consideration.
Issue (i): Whether the development activity undertaken under the joint development agreement, including construction of roads, drainage, garden, electricity infrastructure and allied works for plotted land, falls within Para 5 of Schedule III as sale of land or is a taxable supply of services under works contract.
Analysis: The agreement showed that the applicant was authorised only to develop the land into residential plots and to carry out the allied infrastructure works, while ownership of the land continued with the landowner. The sale of plots was incidental to the main development activity, and the applicant did not acquire title to the land or become the seller of the plots. The role performed was therefore that of a service provider engaged in development of the site, not a person effecting sale of land within Para 5 of Schedule III.
Conclusion: The activity does not fall under Para 5 of Schedule III and is taxable as a supply of services under works contract.
Issue (ii): Whether the value of supply is to be determined under Rule 31 of the GST Valuation Rules and whether the amount equal to 40% of the sale value of plots constitutes the taxable consideration.
Analysis: The arrangement provided that the applicant would receive 40% of the sale proceeds of each plot as its remuneration for the development services. The consideration was therefore monetary and linked to the sale proceeds, making Rule 27 inapplicable. The facts also did not attract Rule 28, Rule 29 or Rule 30. Since the value could not be determined under those rules, Rule 31 applied, read consistently with Section 15 of the CGST Act, under which the transaction value is the price actually paid or payable. The 40% share received on sale of plots constituted consideration for the taxable supply.
Conclusion: Rule 31 applies and the taxable value is the amount received or receivable by the applicant, being 40% of the plot sale value.
Final Conclusion: The applicant's development activity was held to be a taxable works contract service and the valuation was linked to the agreed revenue share from plot sales.
Ratio Decidendi: A person who does not hold title to land and merely develops plots and allied infrastructure under a revenue-sharing arrangement is not engaged in sale of land; the agreed share of sale proceeds constitutes consideration for taxable services and is valued as transaction value under the GST valuation framework.
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AI Drafter ✕
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