Land development under a joint venture can be taxable service when substantial works and revenue-sharing define the arrangement.

A joint development arrangement that required the developer to survey, level, fence and construct roads, drains and pathways, with sale proceeds shared in a fixed ratio, was treated as more than a mere sale of land. The dominant element was held to be development of land for consideration, so the transaction fell outside the exclusion for sale of land and was taxable as a supply of service under GST. The valuation accepted by the lower authority under Rule 31 of the CGST Rules was also upheld, as no infirmity was found in the method once the activity was characterised as a taxable service.

---

---

Issues: (i) Whether the activity of development and sale of land under the joint development arrangement was a taxable supply of service under GST; (ii) Whether the value of such supply was to be determined under Rule 31 of the Central Goods and Services Tax Rules, 2017.

Issue (i): Whether the activity of development and sale of land under the joint development arrangement was a taxable supply of service under GST.

Analysis: The arrangement was not a sale of land simplicitor. The agreement required the developer to survey, level, fence, lay roads, drains, pathways and carry out the entire development at its own cost, while the sale proceeds of the plotted land were shared between the landowner and the developer in a fixed ratio. On this structure, the dominant element of the transaction was development of the land, and the consideration for that development was the agreed share in the sale revenue. Since sale of land is excluded from supply only when the transaction is confined to transfer of title in land, the presence of development obligations and infrastructure works took the case outside Schedule III. The composite supply argument also failed because one element was not a taxable supply at all, while development activity itself was a taxable service.

Conclusion: The activity of development of land was held to be a supply of service liable to GST, against the assessee.

Issue (ii): Whether the value of such supply was to be determined under Rule 31 of the Central Goods and Services Tax Rules, 2017.

Analysis: Having held that the developer rendered a taxable service in a revenue-sharing joint development arrangement, the valuation adopted by the lower authority based on Rule 31 was not disturbed. The appeal did not disclose any infirmity in the method adopted for valuation once the transaction was treated as taxable service.

Conclusion: The applicability of Rule 31 and the valuation determined thereunder were upheld, against the assessee.

Final Conclusion: The appeal failed on merits and the advance ruling was affirmed in full, leaving the taxability of the development activity and the valuation adopted by the authority undisturbed.

Ratio Decidendi: Where a land development arrangement requires the developer to perform substantial development work for a share in sale proceeds, the transaction is not confined to sale of land and the development component is taxable as a supply of service.

---