2023 (5) TMI 709 - AAR - GST

Plot sales with bundled charges: basic infrastructure exempt, common amenities taxable under Section 7(1)

In Re: M/s. Godrej Properties Limited,

AAR Karnataka ruled on GST applicability for plot sales with bundled charges. Plot area consideration falls under Schedule III entry 5, exempt from GST as ... Levy of GST - construction of immovable property - booking of plot, receipt of consideration and agreement for sale is entered as well as sale deed is executed after as well as prior to the release certificate - Sale of Plot - Basic Infrastructure Development charges - Other common amenities and facilities charges - applicability of GST if the sale price is a consolidated price in the agreement for sale towards land cost, basic infrastructure development charges and other common amenities and facilities charges. HELD THAT:- It is seen that the applicant has separately collected the consideration towards the (a) Plot area, (b) basic infrastructure development charges, and (c) other common amenities and facilities. Consideration towards the plot area - HELD THAT:- It is clear that the same is covered under entry 5 of Schedule III, and hence the transaction shall be treated neither as a supply of goods nor a supply of services. Consideration separately shown to have been collected towards basic infrastructure charges - HELD THAT:- It is seen that the same are done to provide the basic infrastructure facilities like electricity access up to the plot, water and sewerage access up to the plot and roads, etc. These are mandatory requirement for release of plots and the plots become the saleable plots only after the provision of these basic infrastructure and facilities. Hence they are a part and parcel of the consideration for the plot though collected and shown separately. These facilities created are to be handed over to the local authorities and no longer remain the part of the applicant's property. Hence the consideration collected towards basic infrastructure development is part of the consideration towards the plot and is not a consideration for a separate supply - These constructions are done on the land not transferred to the plot owners but remains in the ownership of the applicant till it is relinquished to the local authorities. Hence the amount collected on account of this only increases the value of the land (plot) and hence do not form a separate supply. Consideration separately shown to have been collected towards common amenities and facilities - HELD THAT:- It can be seen that the Club House and other common amenities are provided as a service with no transfer of title to land or buildings and hence would not be covered under entry 5 of Schedule III of the CGST Act. What is provided is only a service of access to the service facilities and hence is liable to tax and does not form part of the consideration for the land or building. These are also not mandatory facilities to be provided as per any law. The ownership rights on the above facilities are found to be still remaining with the Promoter and the Promoter can assign these facilities to anyone of his choice and the Purchaser is only provided with access rights. Hence this provision of access rights for a separate consideration would definitely form a separate supply under the provisions of Section 7(1) of the CGST Act, 2017. Corpus fund - HELD THAT:- The same is found to be in the nature of deposit for future expenses and if the future expenses are known when the amount is collected, the same attains the nature of advance and hence becomes taxable at the time of its collection itself. If the nature of expenses are not known at the time of collection and it is for unforeseen expenses, it would be in the nature of a deposit and is not a part of consideration for a supply at the point of collection but when the same is applied to an expense, the supply would be constituted and would be taxable. Applicability of GST if the sale price is a consolidated price which includes land cost, basic infrastructure development charges and other common amenities and facilities charges - HELD THAT:- There is only service of access to club house and common amenities and the same is considered as a supply and hence the value proportionate to club house and common amenities are applicable to GST. Issues Involved:1. Liability to charge GST on sale of plot, basic infrastructure development charges, and other common amenities and facilities charges.2. Applicability of GST if booking and/or receipt of consideration and/or agreement for sale is entered prior to the release certificate.3. Applicability of GST if the sale price is a consolidated price.Summary:Issue 1: Liability to charge GST on sale of plot, basic infrastructure development charges, and other common amenities and facilities charges.The applicant is not liable to charge GST on the sale of plots and basic infrastructure development charges if the booking, receipt of consideration, agreement for sale, and sale deed execution occur after the release certificate. This is because the sale of land is neither a supply of goods nor services as per Entry No.5 of Schedule III of the CGST/KGST Act, 2017. However, the applicant is liable to charge GST on other common amenities and facilities charges as these are considered services and do not form part of the consideration for the land.Issue 2: Applicability of GST if booking and/or receipt of consideration and/or agreement for sale is entered prior to the release certificate.The applicant is not liable to charge GST on the sale of plots and basic infrastructure development charges if the booking, receipt of consideration, and/or agreement for sale are entered into before the release certificate, and the sale deed is executed after the release certificate. The rationale is similar to Issue 1, where the sale of land is not considered a supply of goods or services. However, GST is applicable on other common amenities and facilities charges even if the agreement is entered before the release certificate and the sale deed is executed after the release certificate.Issue 3: Applicability of GST if the sale price is a consolidated price.If the sale price is a consolidated price, then the charges proportionate to common amenities and facilities are applicable to GST. This is because the provision of access rights to common amenities and facilities is considered a separate supply under Section 7(1) of the CGST Act, 2017, and is thus liable to GST.Ruling:1. a) No GST on the sale of plots if all transactions occur after the release certificate. b) No GST on Basic Infrastructure Development charges if all transactions occur after the release certificate. c) GST is applicable on other common amenities and facilities charges if all transactions occur after the release certificate.2. a) No GST on the sale of plots if booking and/or receipt of consideration and/or agreement for sale occur before the release certificate and the sale deed is executed after the release certificate. b) No GST on Basic Infrastructure Development charges if booking and/or receipt of consideration and/or agreement for sale occur before the release certificate and the sale deed is executed after the release certificate. c) GST is applicable on other common amenities and facilities charges if booking and/or receipt of consideration and/or agreement for sale occur before the release certificate and the sale deed is executed after the release certificate.3. If the sale price is consolidated, GST is applicable on the proportionate charges for common amenities and facilities.