GST-free sales of lots with minimal infrastructure: AAR

Karnataka bench of the GST-Authority for Advance Rulings (AAR) has ruled that goods and services tax (GST) is not payable on plots . Karnataka bench of the GST-Authority for Advance Rulings (AAR) ruled that goods and services tax (GST) is not payable on them .

Mumbai: Even if the plots are sold after completion of work relating to basic necessities (such as land levelling, installation of sewage lines, etc.), the Karnataka bench of the GST-Authority for Advance Rulings (AAR) has ruled that goods and services tax (GST) is not payable on them.However, a brisk storm ensued over whether or not the selling of plots after some basic work was completed was subject to GST.This litigation is now easing, according to Harpreet Singh, a KPMG-India indirect tax partner.

According to this circular, even the selling of plots after some minor renovation has occurred is not a sale of land per se and is not subject to GST.However, GST will be levied on services provided for the development of the property, such as land levelling, laying of drainage lines, etc.The CBICs' clarification and this advance ruling clear the confusion in terms of GST in the sale of land.Typically, plots are sold to individuals who are constructing their own houses after a minimum effort has been undertaken by the seller (land owner).

The property would be planned in accordance with the District Town and Country Planning Act, according to her.The construction of land involves the building of highways, rain water pipes, installation of electricity cables, water pipes, sewerage lines, drilling of bore-wells, construction of a power sub-station, and obtaining power from the electricity board.Without providing these basic requirements, the authorities will not grant permission to sell plots to individuals for the construction of houses.She also inquired if GST would be applicable to plots sold after completion of works related to basic necessities, and received a positive response about its non-applicability.