Farmer's sale of developed land plots with infrastructure amenities constitutes taxable service under GST at 18%

The AAAR-Gujarat ruled that a farmer's sale of developed land plots with infrastructure amenities constitutes taxable service under GST, not exempt land sale. The appellant developed vacant land outside municipal area with drainage, water, electricity lines and leveling as required by Jilla Panchayat approval, then sold plots including proportionate infrastructure costs. The authority held this activity falls under construction services taxable at 18% GST rate rather than Schedule-III exemption for land sales, as the transaction involves supply of developed plots with civil structures, not mere land transfer.

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Issues Involved:
1. Applicability of GST on the sale of developed plots of land.
2. Determination of whether the sale of developed plots falls under the scope of 'supply' as per the CGST Act.
3. Consideration of the transaction as a composite supply.
4. Compliance with the conditions mandated by the plan passing authority (Jilla Panchayat).
5. Timeliness and validity of the appeal filed by the appellant.

Detailed Analysis:

1. Applicability of GST on the Sale of Developed Plots of Land:
The appellant questioned whether GST is applicable on the sale of plots of land where primary amenities such as drainage, water line, electricity line, and land leveling are provided as per the requirements of the Jilla Panchayat. The Gujarat Authority for Advance Ruling (GAAR) ruled that GST is applicable on such sales, considering the provision of these primary amenities as part of the transaction. The GAAR referenced Entry 5 of Schedule-III of the CGST Act, which excludes the sale of land from GST, but noted that the sale of developed land with amenities constitutes a service, thus attracting GST.

2. Determination of Whether the Sale of Developed Plots Falls Under the Scope of 'Supply' as per the CGST Act:
The appellant argued that the sale of land should fall under Entry 5 of Schedule-III of the CGST Act, which treats the sale of land as neither a supply of goods nor a supply of services. However, the authority observed that the sale of developed plots involves providing common amenities, making it a 'supply of services' under clause 5(b) of Schedule-II of the CGST Act. The authority emphasized that the appellant's sales price includes the cost of both the land and the common amenities, thus constituting a taxable supply.

3. Consideration of the Transaction as a Composite Supply:
The appellant contended that the transaction should be considered a composite supply, where the principal supply is the sale of land, and the provision of common amenities is ancillary. However, the authority found that the conditions for a composite supply were not met, as the appellant was not a taxable person under GST law, and the transaction did not involve multiple taxable supplies bundled naturally. Therefore, the transaction could not be classified as a composite supply.

4. Compliance with the Conditions Mandated by the Plan Passing Authority (Jilla Panchayat):
The appellant proposed to sell plots with a condition that buyers would develop common amenities by forming an Association of Persons (AOP). The authority noted this arrangement contradicted the Jilla Panchayat's mandate that the appellant must develop these amenities. The authority found no evidence that the appellant's sale price excluded the cost of developing these amenities, leading to the conclusion that the sale involved developed plots, not mere land.

5. Timeliness and Validity of the Appeal Filed by the Appellant:
The appellant filed the appeal on 31.08.2020, referencing extensions provided due to the Covid-19 pandemic. The authority accepted the appeal as timely, considering the extensions granted by Notification No. 35/2020-Central Tax and Notification No. 55/2020-Central Tax.

Conclusion:
The Appellate Authority upheld the GAAR's ruling, confirming that the sale of developed plots is a taxable service under the CGST Act. The transaction is not covered under Entry 5 of Schedule-III, as it involves the provision of common amenities, thus falling under 'construction services' and attracting GST at 18%. The appeal was rejected on these grounds.

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