Levy of GST— The present appeal has been filed against the Advance Ruling order by the Assistant Commissioner of Central Tax, Bangalore South Commissionerate (Appellant). This is an appeal filed by the Department against the ruling given by the Authority for Advance Ruling in the case of Ms Rabia khanum.

Ms. Rabia khanum (Respondent) is an un registered individual who owns three acres of land and intends to convert this land for residential usage by forming small plots of land (residential sites) and sell the plots to individuals. The Respondent claims that they will be developing the land as per regulations of the District Town and Country Planning Act (DTCPA), The Karnataka Real Estate Regulation Act and other zonal regulations that would be applicable while obtaining sanction of the plan.

The Respondent filed an application for Advance Ruling in respect of the following questions:-

i. Whether GST is applicable for the consideration received on sale of sites? If yes, at what rate and on what value?

ii. Whether GST is applicable for the advance received towards sale of site? If yes, at what rate and on what value?

iii. Whether GST is applicable on sale ofplots after completion of works related to basic necessities?

iv. If GST is chargeable on any of these transactions, can the applicant collect the GST from the prospective buyers?

v. If GST is chargeable on any of these transactions whether the applicant is eligible for claiming Input Tax Credit that they pay on the expenses they incur on development?

The Authority for Advance ruling examined the case of the Respondent and after taking into consideration the CBIC Circular No. 177, dated 3rd August 2022, has passed the ruling as under:-

i. GST is not applicable for the consideration received on sale of site.

ii. GST is not applicable for the advance received towards sale of site.

iii. GST is not applicable on sale of plots/sites even when they are sold after completion of works related to basic necessities.

iv. In view of the ruling given at question (i), the questions (iv) and (v) of the application becomes redundant.

The Appellant Department is aggrieved only with respect to the advances received by the Respondent. It is the case of the Department that the advances received by the Respondent from prospective buyers before completion of the development works is liable to tax at the hands of the Respondent under the category of Works Contract since, carrying out the development activity before the sale of the site is akin to rendering a service to the purchaser.

The entry No 5 of Schedule III to the CGST Act states that 'sale of land' is neither supply of goods or services. The term "Sale" has not been defined in the GST law but has been defined in Section 54 of the Transfer of Property Act, 1882 as "transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. '. The said Section 54 also states that such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, can be made only by a registered instrument. Therefore, the term 'sale of land' as mentioned in entry 5 of Schedule III refers to the transfer of title in the land by way of registration as per the Registration Act, 1908.

Sale of land developed by the Respondent is covered within the scope of the term 'sale of land' as mentioned in entry 5 of Schedule III.

Held that— This authority reject the appeal filed by the Assistant Commissioner of Central Tax and uphold the ruling given by the Authority for Advance Ruling.