Real estate alert! Planning to buy plot? Must know this important tax development before purchasing land

It's a piece of important information for those planning to buy developed land or plots with primary amenities - such as drainage, waterline and electricity. In a major decision, the Authority for Advance Ruling (AAR) has said that developed land sold as plots will attract GST. AAR says, "GST will be levied on sale of land for which primary amenities - such as drainage, waterline and electricity - have been provided by real estate developer."

The AAR has also concluded that sale of developed plots will be covered under the clause 'construction of a complex intended for sale to a buyer' and accordingly GST would be levied.

An applicant had approached the Gujarat bench of AAR on whether Goods and Services Tax (GST) is applicable on sale of plot of land for which, as per the requirement of approved by the respective authority (i.e. Jila Panchayat), primary amenities such as, drainage line, water line, electricity line, land levelling etc are to be provided by the applicant.

What AAR said?

"We find that the activity of the sale of developed plots would be covered under the clause 'construction of a complex intended for sale to a buyer'. Thus, the said activity is covered under 'construction services' and GST is payable on the sale of developed plots...," the AAR said.

Moreover, the AAR, while passing the ruling, said that the applicant sells the developed land as plots and the sale price includes cost of land, as well as price of amenities on a proportionate basis.

AAR

As per CBIC website, "To facilitate foreign investment into the country a number of steps have been taken by Government of India in the past.  Setting up an Authority for Advance Rulings (Central Excise, Customs & Service Tax) to give binding rulings, in advance, on Central Excise, Customs and Service Tax matters pertaining to an investment venture in India is one such measure. The legal provisions of Advance Rulings were introduced through the Finance Acts of 1998, 1999 and 2003. The scheme of Advance Rulings has assumed special significance in the context of greater emphasis on FDI.  Advance Rulings afford far greater certainty to foreign investors in respect of their prospective indirect tax liabilities."