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Question ID : 36887

GST on sale of plotted and developed land

Taxpayer has purchased land. He will do plotting of the same (sub-plots , internal roads , lighting, garden etc). Then he will sell the plots to buyers who can then construct units on their plots. Ques: 1. Is it taxable in GST if plots are sold before completion? 2. If yes, what value is to be adopted? 1/3 abatement is unfair since majority cost if land 3. Can 2 agreements be made: 1 for sale of land (no GST), 1 for development (with applicable GST)? (transaction value can hold since no related party customers)

Posted by Gaurav S Kenkre on Dec 11, 2018

Filed Under GST

Answer ID : 76055

Sale of under construction plots after development work like sub-plotting, lighting, road etc. will be covered under civil structure as per Schedule III and will be taxable under GST. Value of land is deemed as 1/3 of total amount irrespective of actual cost of land. The land and super structure becomes inseparable during construction. Hence separate agreement for sale of land is impermissible.

Posted by CA. chunauti dholakia on Dec 11, 2018
Answer ID : 76057

You're right for feeling wronged, by the likely impact GST on basically land and the insufficiency of 1/3rd deduction. Since this is not JDA but owned land, obviously you will pre-sell plots that are not in existence and collect money from buyers. When there is no plot and you are collecting money, obviously you will need to state that it is towards development cost. That's where GST comes in. If instead, development was undertaken with own funds. GST paid on inward supplies will be a cost with no output tax liability. Please read https://timesofindia.indiatimes.com/city/mumbai/buyers-find-ways-to-avoid-steep-gst-on-flats-being-built/articleshow/64820414.cms But you're right, land is land, possibility of GST incidence on plot development is not fair. This needs to be agitated before Courts. But, the customer would have long gone and credit would not have been availed. Advisable to take route of not subjecting plot development to GST and litigate, if required.

Posted by CA. JATIN CHRISTOPHER A on Dec 11, 2018
Answer ID : 76062

If before completion- liability could be there. Ideally 2 agreements - 1) for land with value and 2) for development entered and GST paid for only development. Value can be based on contracted value for development only.

Posted by Madhukar N Hiregange on Dec 13, 2018