Calculation of property value for sale with undivided land rights under notification rules

The Authority ruled that for the sale of residential/commercial property with undivided rights of land, the value of supply must adhere to the notification's provision, deducting one third of the land value. The actual cost of land cannot be deducted in construction projects where land value is ascertainable, as the deeming provision mandates the deduction of one third of the total amount charged for the supply.

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Issues:
1. Determination of the value of supply for the transaction of sale of residential/commercial property with undivided rights of land.
2. Whether the actual cost of land can be deducted for the purpose of arriving at the taxable value of supply in the case of construction of a residential/commercial complex where the land value is ascertainable.

Analysis:

Issue 1:
The applicant, engaged in construction business, sought an Advance Ruling on the value of supply for the sale of property with undivided rights of land. They contended that the cost of land being transferred should be allowed to be deducted as a whole, contrary to the prescribed deduction of one third (33.33%) as per relevant notifications. The applicant argued that the actual value of land is determinable and varies based on location, thus the uniform deduction percentage is not suitable. However, the Authority found the applicant's contention not legally tenable. The relevant notification clearly states that the value of land or undivided share of land to be deducted is one third of the total amount charged for the supply. The reliance on the erstwhile Value Added Tax Rules was deemed irrelevant as the determination of GST liability is governed by the GST Act. Therefore, the Authority ruled that the applicant must deduct one third of the land value from the total value charged for the supply.

Issue 2:
Regarding the deduction of the actual cost of land for arriving at the taxable value of supply in construction projects where land value is ascertainable, the Authority negated the applicant's request. The deeming provision in the relevant notification specifies that the value of land or undivided share of land to be deducted is one third of the total amount charged for the supply. The Authority emphasized that the applicant is required to adhere to this provision, and the actual cost of land cannot be deducted for determining the taxable value of supply.

In conclusion, the Authority ruled that the value of supply for the sale of residential/commercial property with undivided rights of land must be determined as per the deeming provision in the notification, and the actual cost of land cannot be deducted for arriving at the taxable value of supply in construction projects where land value is ascertainable.

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