TaxTMI 
TaxTMI 
2022 (7) TMI 411
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.... of both - the CGST Act and the MPGST Act are mirror image of each other except for certain specific provisions, therefore unless a specific mention is made to any dissimilar provisions, a reference to the CGST Act would mean a reference to the Page 1 of 16 similar provisions under the MPGST Act and vice-versa. At places we may refer it as GST Act. 2. BRIEF FACTS OF THE CASE M/s Bhopal Smart City Development Corporation Limited (hereinafter referred to as 'BSCDCL'), Zone - 14, Bhopal Municipal Corporation, BHEL Govindpura, Bhopal - 462023, had submitted application u/s 97(1) of CGST Act & MP GST Act seeking Advance Ruling from the Authority for Advance Ruling, Madhya Pradesh, on the following questions; I) Whether GST is applicable on sale of developed plot of land for which consideration is received before the issuance of completion certificate (if any), under the following facts:- a) The sale of plot is after carrying out the development activities providing amenities such as drainage line, water line, electricity line, land leveling, and common facilities viz. road and street light etc. which are to be provided by BSCDCL; and b) remaining....
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....r undertaking development activities is taken then it does not constitute a supply within the meaning of Section 7 of the GST Laws and therefore GST is not applicable on such sale. 8.2 In respect of the other questions raised, in light of the ruling regarding Question - I, they have become redundant and therefore no ruling is required to be passed in respect of other questions raised. 8.3 The ruling is valid subject to the provisions under section 103 (2) until and unless declared void under Section 104 (1) of the GST Act." Being aggrieved by the said ruling of the AAR, the jurisdictional officer has 1 /2021/1434 dt. 23.12.2021. 4. QUESTIONS RAISED BEFORE THE APPELLATE AUTHORITY FOR ADVANCE RULING (AAAR) 4.1 The appellant has challenged the above referred ruling of the AAR mainly on the following grounds i. The ruling has given consideration to the definition of land only and ignored other associated factors like changing of the character of raw land to developed land. ii. The sale of developed land by BSCDCL is not just a case of sale of land, but is altogether a different transaction. In this transaction, the monetary value of the faci....
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....made reference to section 15(2) of CGST Act, to contend that anything done by the supplier i.e. development work at the time of delivery of services of goods, is part of value of supply. vii) The respondent also made reference to para 5 of Schedule III of CGST Act to contend that the sale of land is outside the ambit of GST and sale of building can be taxed only as provided in para 5(b) of Schedule II. viii) On the issue of reliance of the appellant on the decision of Hon. Supreme Court of India in the case of M/s Name Construction Pvt. Ltd. Vs. Union of India (2013-29-STR3), the respondent has argued that the said judgment has been given in the context of section 2(1 )(0) of the Consumer Protection Act, 1986 where the builder has failed to carry out the promise of development of plot to the buyers which was adjudged as failure to carry out the promise of service to the consumers, and is a beneficial legislation thus it would not be appropriate to apply the ratio of aforesaid case to decide an issue under taxation laws. ix) The respondent has contended that value addition in the sale price of the plot of land does not alter the basic character of transact....
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....d was allotted to BSCDCL on a free hold basis, vide order dated, 23.05.2017 and the land was transferred without any cost. 5.3 During Personal hearing the respondent was requested to provide details of expenses incurred for carrying out the referred development activities, which was not provided by the respondent. A letter dt. 23.3.2022 was sent to the respondent to provide these details and also to inform the circle rate of the land at relevant time. Reply from the respondent was received vide their letter dt. 11.04.2022, wherein although they did not provide the prevailing Circle rate at the relevant time but informed that from the perusal of the minutes of the Board meeting of the respondent corporation held on 12.11.2020 it could be observed that the total expenses incurred under various heads of expenses are as under: - S.No. Particulars Tender cost (Rs. 1 Grading and leveling of ABD area 6.99 2 Smart Road - Phase III, IV & V 111.06 3 Modular rain water harvesting 8.79 4 Water supply system 50 5 Automated Solid waste management system 20 6 ICT and street lighting 30 7 Landscape 50 8 Sewage line/ W....
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....f land along with development work. The development work is a separate project, apart from land. The appellant has further contended that the sale of developed plot is supply of service as per para 5(b) of Schedule II of CGST Act. The respondent argued that the appellant has failed to appreciate the relevant provisions of GST law with regard to sale of land and supply of construction services. 6.6 With respect to GST, the tax is levied on supply of goods/services. In this regard, the respondent M/s BSCDCL, has made reference to clause (b) of paragraph 5 of Schedule II, of the CGST Act 2017, and also to Paragraph 5 of Schedule III of the CGST Act 2017. 6.7 Respondent has argued that "It is evidently clear that sale of land and sale of goods is outside the ambit of GST. Sale of land is totally outside the scope of GST, while sale of building can be taxed only as provided in para 5(b) of Schedule II". 7 The issues discussed above have been examined. In this case, the issue to be decided is whether GST is applicable on sale of developed plot of land and whether the activities undertaken for developing a barren land into a developed land with provision of amenities essential to....
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....(b) [Area: 9,650.30 Sqm. (0.96503Ha.)] which is located at Khasra No. 116 & 119, Gram Kotra Sultanabad, Patwari Halka T.T. Nagar, Tehsil Huzur, District Bhopal. In this case the respondent, vide their letter 15.3.2022, have submitted that the said land was allotted to them free of cost. As per Question No. 1 (a) of the application before the AAR, as mentioned in the order under consideration, the sale of plot by the respondent is after carrying out the development activities of providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc. which are to be provided by the respondent. Then, after calling for the bids, the land was transferred / sold to the successful bidder for a consideration of Rs.72.40 crores. During the course of personal hearing, and thereafter, the respondent was specifically asked to provide the details of expenses incurred by them for carrying out development activities in respect of the said plot of land. The respondent was also requested to provide the circle rate of land at the relevant time. The specific details, as called for, has not been provided by the respondent despite se....
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....nt work, has changed both in terms of its value and its usability. The respondent has also argued that "Clearly there was no service supplier and service receiver relationship between respondent and purchasers of plot as development of plot was not done for or on behalf of the purchasers. If there was no supplier and receiver relationship, question of levy of GST does not arise". We are of the opinion that the amount spent by the respondent was to inflate the value of the land and to change its character. Even though, while doing the development work, the ospective buyer was not known to the respondent, but whoever the buyer would have been, the respondent has offered him a service for a consideration which has Page been included in the price of the land. Just to say that when the buyer itself was not known at the time of developing the land how can a service be provided to him, is not acceptable as the inflated value of land, which was a result of development activity, was ultimately collected from the buyer. 7.5 Clause 'b' of para 5 of Schedule II of the CGST Act, 2017 is reproduced below: Schedule II 5. Supply of services The following shall be tr....
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....scussed here. 8.1 The Hon'ble Apex Court, in the above judgement, has observed that "undisputed facts in the context of which the question arises have been summed up by the High Court in the following words: "The sale price was not for the virgin land but included the development of sites and provision of infrastructure. The opposite party has undertaken the obligations to develop the plots and obtain permissions/approvals of the lay outs. The opposite party itself pleaded in its counters that the plots were developed by spending huge amounts and subsequent to the amounts paid by the complainants also plots were developed. It pleaded that huge amounts were spent towards protection of the plots from the grabbers and developed roads, open drains, sewerage lines, streetlights etc. It is therefore, manifest that the transaction between the parties is not a sale simplicitor but coupled with obligations for development and provision of infrastructure. Inevitably, there is an element of service in the discharge of the said obligations. " 8.2 The Hon'ble Apex court observed that "the High Court was perfectly justified in holding that the activities of the appellant-c....
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....urposes of paragraph 2, "total amount" means the sum total of,- (a) consideration charged for aforesaid service; and (b) amount charged for transfer of land or undivided share of land, as the cose may be. 9.1 Para 2 of Notification No. 11/2017-Central Tax (Rate) Dated 28th June, 2017, says that "In case of supply of service specified in column (3) of the entry at item (i) against serial no. 3 of the Table above, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply". Thus, the mechanism for quantification of service portion in transactions involving transfer of property in land has been clearly spelled out for levy of applicable GST. 10. In light of the above discussions and findings we are of the view that the AAR has not given due consideration to the crucial issues rela....