Individual landowner's sale of developed residential land with basic infrastructure remains exempt from GST under Schedule III Entry 5

Karnataka AAR held that sale of developed land by an individual landowner does not attract GST. The applicant planned to convert land into residential sites after basic development works like levelling and laying drainage, water, and electricity lines. Relying on CBIC Circular No.177/2022 and Schedule III Entry 5 of CGST Act 2017, the Authority ruled that sale of such developed land remains a sale of land and is exempt from GST. The ruling clarified that basic development activities do not change the nature of the transaction from land sale to taxable supply.

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Issues:
1. Applicability of GST on the consideration received on the sale of sites.
2. Applicability of GST on the advance received towards the sale of sites.
3. Applicability of GST on the sale of plots after completion of works related to basic necessities.
4. Collection of GST from prospective buyers.
5. Eligibility for Input Tax Credit on expenses incurred on development.

Analysis:

Issue 1: Applicability of GST on the consideration received on the sale of sites
The applicant sought an advance ruling on whether GST is applicable to the consideration received on the sale of sites. The Authority referred to Schedule III of the CGST Act, which states that the sale of land is neither a supply of goods nor services. Additionally, a circular issued by CBIC clarified that the sale of developed land, including after levelling and laying down drainage lines, falls under the same category and does not attract GST. Therefore, the Authority ruled that GST is not applicable to the consideration received on the sale of sites.

Issue 2: Applicability of GST on the advance received towards the sale of sites
Similarly, the Authority held that GST is not applicable to the advance received towards the sale of sites, in line with the ruling on the first issue.

Issue 3: Applicability of GST on the sale of plots after completion of works related to basic necessities
The applicant inquired whether GST is applicable on the sale of plots after completing works related to basic necessities. Following the same reasoning as the previous issues, the Authority ruled that GST is not applicable on the sale of plots/sites, even after the completion of essential works.

Issue 4: Collection of GST from prospective buyers
Given the rulings on the first issue, the question of whether the applicant can collect GST from prospective buyers became redundant.

Issue 5: Eligibility for Input Tax Credit on expenses incurred on development
Since the applicant was not liable to pay GST on the sale of sites, the question of claiming Input Tax Credit on expenses incurred on development also became redundant.

In conclusion, the Authority ruled that GST is not applicable to the consideration received on the sale of sites, the advance received towards the sale, or the sale of plots after completing basic necessities. The rulings rendered the questions regarding collecting GST from buyers and claiming Input Tax Credit irrelevant.

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