GST on sale of Plots: Landmark Ruling by AAR, MP
The applicability of GST on the under development plot has been issue of controversy and litigation after the judgment by Gujrat AAR that sale of under-developing plot tantamount to supply and liable for GST. The link of AAR Gujarat is accessible at –
“GST is applicable on sale of plot after Development by developer – ☛ https://thetaxtalk.com/ 2021/07/14/gst-is-applicable/ “
This impact of above AAR was mind blowing and has resulted in sleepless night for many. There is a sign of relief for few now with AAR Ruling by Madhya Pradesh which has held that the
It was in the case of Bhopal Smart City Development Corporation Ltd wherein GST AAR Madhya Pradesh was concerned with the following issue:
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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 oi 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 applicant; and
b. remaining construction activities including civil foundation on the developed plot will be carried out by the buyer on their own account and cost.
The AAR regarding applicability of GST on sale of developed land has opined as under:
8 Ruling
8.1 On the basis of above discussion, in respect of Question – I regarding applicability of GST on sale of developed land (the applicant has declared that no completion certificate is required for the project) for the reasons stated above, it is ruled that the sale of developed land, by the applicant as per the facts provided by him where the development work is limited to providing common amenities ( common drainage, water line, electricity line, land levelling, road and street light) and no development work will be done by the applicant after the sale of the developed land and if no advance from the customer for 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.
The copy of the Said Landmark Ruling is as under:
GST AAR Madhya Pradesh
Bhopal Smart City Development Corporation Ltd ()
Advance Ruling No. 16/2021
Order Dated 22/11/2021
PROCEEDING
(Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017 and the Madhya Pradesh Goods & Service Tax Act, 2017)
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M/s Bhopal Smart City Development Corporation Limited((hereinafter referred to as ‘Applicant’), is a company incorporated under the Companies Act, 2013 with registrar of Companies, Gwalior and with sole objective of Planning and implementing the “Smart City Project” in Bhopal. It is registered with the GST Authorities in the State of Madhya Pradesh and has been granted Registration No 23AAGCB6537N1ZE.
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The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.
BRIEF FACTS OF THE CASE AND SUBMISSION OF THE APPLICANTS IN THEIR APPLICATION IS AS UNDER –
3.1. The Applicant is a Public Sector Undertaking. The company is jointly owned by the Government of MP and is equally managed by Madhya Pradesh Urban Development Company Limited (MPUDCL) and Bhopal Municipal corporation(BMC).The sole objective of Applicant is Planning and implementing the “Smart City Project” in Bhopal.
3.2. Smart City Bhopal Mission and values: The smart city mission of the Government of India seeks to address the issue of urbanization through the transformation of selected cities. The intent is to create sustainable cities that can provide a good quality life to its citizens.
Bhopal has been amongst the 20 lighthouse cities with a dramatically different approach which is driven by ‘Redevelopment’ rather than ‘Retrofitting’.
3.3 in pursuance to LAND MONETIZATION SCHEME of Smart City Mission, A RFP for Allotment of Plot on freehold basis for ABD { Area Based Development) Plot No. 79(b) [Area: 9,650.30 Sqm. (0.96503 Ha.)] which is located at Khasra no 116 & 1419, Gram KotraSuItanabaad, PatwariHalka T.T. Nagar, Tehsil Huzur, District Bhopal had been issued vide Tender No. 159 dated 24-12-2020 by the BSCDCL. (Copy of RFP submitted by the Applicant). The Schedule-I at Page 67 of RFP provides the details of said Plot.
RELEVANT PARA(S) OF RFP ARE AS UNDER:-
3.4 The Plot falls under ABD area, which is envisaged to be developed as Commercial use. (Please refer 1.1.8 of RFP at Page 20).
3.5 The description of the ABD Area (Please refer 1.7 of RFP at Page 21-22) which is as under:
Bhopal is one of the twenty cities to be selected in the first round of smart cities challenge of Government of India (Gol). Bhopal Area Based Development (ABD) proposal includes redevelopment of 342 acre of North & South TT Nagar, which is Also the only redevelopment and rehabilitation project among the 100 smart cities selected by Gol.
The area-based development is proposed to be a state of art smart city in the heart of the city of Bhopal with all modern features in a sustainable manner and would generate more job opportunities. The project area is very well connected to all means of transport like BRTS, Railway station and Airport. Furthermore, it also falls along upcoming MRT axes, with three metro stations within the Ph t area, which would play an important role in commercial development and value of this area. Proximity upper lake and gardens around the city create a connect to the nature and make it a desirable location.
3.6 The project development is mainly focused along two major existing roads and a proposed 45 m Boulevard Street. The Boulevard Street will connect the two proposed commercial nodes at the metro stations. With an approx, investment of 2,500 crores the ABD area has been envisaged to develop with state-of-the-art infrastructure with all the smart features and green technology as per the smart city guidelines. These infrastructures will include 24×7 water supply and power, underground utility corridor, ICT infrastructure, smart street lighting, automated solid waste system, to name a few. 80 % of the buildings in the area will be green rated. An integrated command and control centre will monitor and manage the ABD area as well as entire city.
The Schedule-II at Page 68 of RFP provides the details of PROJECT UTILITIES which is to be provided by the applicant in respect of said Plot.
3.7 Execution of Allotment Letter (Please 8 of RFP at Page 26)
“8.1 The Allotment letter [as per the RFP Part-Ill] will be issued to the Allottee, after the Selected Bidder has fully complied with the terms of LolD. The Selected Bidder will be referred to as an Allottee in the Allotment letter, after BSCDCL has received the payment of First Instalment of the Sale Price, amounting to 25% (Twenty Five percent] of the sale Price within 60 (Sixty) days from the date of issuance of LolD.
8.2 Please take note that the issuance of Allotment letter does not grants or vests any ownership rights and/ or possession rights over the Plot in favour of the Allottee any manner whatsoever, and BSCDCL shall continue to have complete ownership and possession of Plot /property till entire Sale Price/ sale consideration has been paid by the Allottee to BSCDCL and a Deed of Conveyance has been executed in favour of the Allottee.”
3.8 Execution of Deed of Conveyance Please refer 10.1 of RFP at Page 27),-
“10.1 Any time after the payment of the full Sale Price (including the applicable interest, if any) as per the terms of the Allotment letter, the Allottee may approach BSCDCL for execution of the Deed of Conveyance, whereby the ownership of the Plot shall transferred to the Allottee in accordance with the applicable laws. BSCDCL shall execute the Deed of Conveyance within 30 (Thirty) day of receipt of li e written intimation (along with documentary evidence) by the Allottee with regard to the full payment of Sate Price. BSCDCL will release the Performance Security after the execution of the Deed of Conveyance.
10.2 In the event, the Successful Bidder fails to comply with all the terms and conditions provided under the LolD and the Allotment letter within the stipulated period specified therein or extended period, if approved by BSCDCL, the Bid Security and/or any other amounts submitted by the Successful Bidder to BSCDCL shad Ic forfeited and the Allotment of the Plot shall stand cancelled.
10.3 The Allottee, after due compliance of pre-requisites under the LolD and the Allotment letter within the stipulated period and upon complete payment o] tl t Sate Price along with any interest thereon, will be referred as Buyer in the Deed of Conveyance.
10.4 Subject to timely payment of the Sale Price and compliance with all the terms and conditions of the LolD, Allotment Letter and the Bid Documents, the Deed oj’ Conveyance shall be executed between BSCDCL and the Selected Bidder.
10.5 Stamp Duty in accordance with applicable laws and all applicable taxes including registration costs shall be solely borne by the Buyer at the time of execution of Deed of Conveyance.”
3.9 Commencement of Construction by the Allottee: (please refer 9.0 of REP at page 26-27),-
9.1 : In view of the fact that the Selected Bidder/ Allottee shall have no ownership and/ or possession rights over the said Plot unless the entire Sale Price along with the interest accrued if any, has been paid to BSCDCL, the Selected Bidder/ Allottee shall not have any rights to undertake or commence any construction/ development activities on the said Plot and or portray that the Selected Bidder/ Allottee is the owner of the said Plot.
9.2 : Upon execution of the Deed of Conveyance and handover of possession of said Plot by BSCDCL to the Buyer, the Buyer shall fully abide by all the norms with respect to building regulations and permissions (as amended from to time) as per MP Bhumi ViKasNiyam, 2012, Development Control Regulations (DCR) of Bhopal Smart City Development Corporation limited and any other applicable law with respect to Area Based Development (ABD) area/ the Plot, and further, the Buyer shall also fully abide by the applicable Development Plan with respect to the Plot.”
3.10 The Applicant will carry out the development activities on the said plot of kind and also in the ABD area. The development activities include 24X7 water supply and power, underground utility corridor, ICT infrastructure, smart street lighting, automated solid waste system. Apart from this, Applicant will develop and maintain other infrastructure such as 45 m Wide Road (Boulevard Street).
3.11 As per REP, Consideration/Sale Price has been fixed for lumpsum basis i.e. Consolidated price for Developed Plot has been fixed. That is, no segregation into Value of Land and value of development facilities/utilities whether relating to Plotor common facilities in the Area has been made.
3.12 The Allottee(Successful Bidder), after complying with the terms and condition of the REP, Allotment Letter, LOID and Conveyance deed may carry out remaining construction activities such as civil foundation and construction of structure thereon as per the agreed norms.
3.13 The Project is registered with RERA as Commercial Project vide Letter dated No/324/Reg/RERA12021 dated 05-04-21 bearing Registration No P-BPL- 2 1-282C The Applicant (BSCDCL) is a promoter as per the RERA provisions.
3.14 In case of “Sale of developed plot”, no requirement of obtaining completion certificate has been prescribed in the Local laws.
4. QUESTION RAISED BEFORE THE AUTHORITY –
The Applicant has submitted application u/s 97(1) of CGST Act & MP GST Act seeking Advance Ruling on the following questions;
1) 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 oi 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 applicant; and
b) remaining construction activities including civil foundation on the developed plot will be carried out by the buyer on their own account and cost.
II) What is applicable rate of GST on the above Supply, if it is supply of goods or supply or both?
III) What is HSN or SAC of GST on the above Supply, if it is supply of goods or supply or both?
IV) What is the Entry No of the Notification on the above supply or activities or transactions?
V) If answer to the Question No I is decided as supply of goods or services or both, whether the actual value of Land as per Government Guidelines can be excluded from the Total Consideration (or Gross amount charged) and remaining value (i.e. Gross amount charged less Value of Land as per Government Guidelines) represented by value of Development carried out by applicant can be treated as taxable value of supply? if Yes, What will be the Taxable value and what will be rate of GST on such Taxable value?
VI) If answer to the Question No V is negative and answer to the Question No I is decided as supply of goods or services or both, whether the benefit of Para-Z of Notification No 11/2017 dated 28-06-2017regarding l/3rd abatement/exclusion on account of the value of transfer of land or undivided share of land from the total amount charged is available to the applicant?
5. DEPARTMENT’S VIEW POINT-
The Deputy Commissioner, Bhopal Circle-I, Bhopal vide letter …………………… dated 08th July 2021 submitted his comments as under:-
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6. RECORD OF PERSONAL HEARING-
Mr. S. Krishnan, CA on behalf of Applicant and Shri Atul Shrivastava, Dy. Commissioner, SGST Circle-1, Bhopal, Jurisdictional officer appeared virtually for personal hearing and Shri Krishnan reiterated the submissions already made in the application. Later on applicant also provided the letter issued by NagriyaVikasEvemAvasVibhag M.P by which the land which was transfer by the department to Bhopal Smart City Corporation Limited. The applicant also gave the detail of how the land costing was to be done by the Corporation.
Later on the applicant also sent a letter stating that the provision relating to obtaining the completion certificate is not applicable in respect of the project being executed by the applicant, in support of his statement the applicant also included a photocopy of letter dated 03-11-2001 issued by the Municipal Corporation Bhopal to the applicant in which the corporation has stated that the completion certificate is issued under the provisions of Madhya Pradesh Nagar PalikaAdhiniyam, 1956 only in respect of such building in respect of which building permission has been issued lo the said building by the building permission department of the Municipal Corporation.
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DISCUSSIONS AND FINDINGS –