GST on sale of land after development- CBIC clarification
Various activities undertaken in the real estate sector are under the ambit of GST. However, the sale of land was excluded from the taxability under GST by mentioning the same in the Schedule III of the CGST Act, 2017. According to Sl. No. (5) of Schedule III of the CGST Act, 2017, ‘sale of land’ is neither a supply of goods nor a supply of services. Thus, the sale of land does not attract GST.
But, some contradictory rulings by Advance Ruling Authorities created confusion in the case where a developer sells a plot of land after undertaking development activities such as levelling, plantation, laying down drainage lines etc. over a piece of land. Due to this, clarification was sought by the industry regarding the applicability of GST on the sale of land after levelling, laying down of drainage lines etc.
In this regard, the Circular No. 177/09/2022 dated 3rd August 2022 issued by the CBIC clarifies as follows:
- Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that the sale of such developed land is also the sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly, does not attract GST.
- However, it may be noted that any service provided for the development of land, like levelling, and laying of drainage lines (as may be received by developers) shall attract GST at the applicable rate for such services.
