The sale of land has always remained a bone of contention between the revenue authorities and the taxpayers regarding its taxability under the provisions of the GST. Although the sale of land is treated as neither supply of goods nor services, the contentious issue comes where the developers make some development upon it for sake of its marketability . In this article we will discuss the same issue.

We all know that the according to the entry 5 of schedule III , CGST Act, 2017 specifically said and which reads out as under :

“5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.”

And also clause (b) of entry 5 of schedule II of the CGST Act are read as under :

(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

Explanation.’For the purposes of this clause’

(1) the expression “competent authority” means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:’

(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

(ii) a chartered engineer registered with the Institution of Engineers (India); or

(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

(2) the expression “construction” includes additions, alterations, replacements or remodelling of any existing civil structure;

So one thing is very much clear from the reading of the above that the intention of the law is very much clear that whenever land is sold it will not be treated as supply under GST and hence not taxable under GST . But now the question arises whether the provision of basic amenities to make the land in sellable condition makes such a drastic change that it changes the very basic nature of the land . In my humble opinion it is not so. The land is land even if the developer of the land makes development upon it . The common facilities like water , drainage , roads, landscaping etc. are for all customers. Also such amenities do not change the nature of the land unless and until some construction etc. carried out upon it and that too is subject to entry no. 5(b) of schedule II of the CGST Act. I think that such development does not convert the land into another product / good or commodity . The revenue must get it understood from the point of view of the law and accordingly do not charge GST upon the sale of the Land.

In the major and recent development the Goa Authority for Advance Ruling In the matter of M/s Shantilal Real Estate Services, has given a very interesting ruling in the favour of the taxpayer and which is in my opinion is very much in line with the intention of the law so as to take away the supply of land outside the ambit of GST . It is pertinent to mention here that as per the provisions of the section 103 of the CGST Act , the advance ruling is binding only upon the applicant . But nevertheless this advance ruling can be used by us by putting our case before the department whenever such type of case comes before us .

The important part of the advance ruling is as under :

The process of subdivision of land into smaller plots basically involves dividing the larger plot of land into small plots of land by demarcating them in line with the permissions obtained by the applicant from various authorities.

It appears that these roads, drainages, and poles which are proposed for construction/ erection are as per the conditions mandated by the local bodies as preconditions for giving NOC for plot development. Plot when purchased as a parcel of land, subdivided info smaller plots saleable with basic amenities involves sizable amount of value addition. It is beyond doubt that there is a contract between probable buyer and seller of subdivided plot. This contract is qualified to be called as sale and the sale in consideration is in respect of the subdivided plot of land. Land will be converted into plots through some value addition works. Before OC, it is land and after OC, it will be a plot. Such value addition works will be carried out to make it marketable as per the norms of the local authority.

The roads, poles or drainages constructed by seller of land are at no time transferred to the purchaser of sub divided developed plot. These amenities will be available for use to every plot holder without any title to it. Further, these amenities in turn will be gifted to the local authority as mentioned by the applicant and thereafter, the local authority will be the owner of such roads and/ or electricity poles. Moreover, this can be better understood from the position that no plot owner or collectively all plot owners will be in a position to sell these polls or roads or drainages nor they will be in a position to sell only plots without having these poles or roads on it. Here probable plot buyer cannot opt to buy only plot without these amenities.

No structure is being erected nor construction of facilities such as gyms, clubhouse etc. in the nature of complex, building, civil structure or part thereof are being undertaken. So, from the above discussion, it can be concluded that the object for sale is land.

The principal transaction is the sale of land and these amenities are a natural part of the sale of the plot of land and these do not, in any way, change the nature of the land or of the transaction or activity being that of sale of land. Further, the sale is taking place from the owner of the plot of land to the prospective buyer of the subdivided plot and it is the ownership that is passing from the current owner of the plot of land to the buyer who will thereby become the owner of the subdivided plot only.

Land is excluded in entirety and in all circumstances whereas building is includable within the scope of supply only upon meeting certain specific criteria.


However in the past many advance ruling has come which is against the ruling of this advance ruling . Some important ones are :

Earlier, Gujarat AAR (in the matter of Dipesh Anil Kumar Naik, 2020) held that that the sale of a developed plot (i.e., sale of land/plot after developing common facilities like water line, telephone line, electricity line, garden, common areas, water harvesting system, drainage system, water pipelines, laying of underground cables, demarcation of individual plots and other facilities as mandated by the development authority) is not equivalent to the sale of land but tantamount to the rendering of service and would be subject to levy of GST.
The other one is given by the AAR Kerala (in the matter of Kerala Dharmic Living (P.) Ltd , 2021) has ruled that sale of land without receiving advance from customers for undertaking development activities is not supply. However, in my humble opinion taking advance against the development of land does not change the character of the land and it remains land in that case too. And therefore will remain outside the ambit of the GST.

If we look back at the position of sale of land under the erstwhile service tax law regime. This issue was ventilated in an appeal filed before the honourable Supreme Court of India in the case of M/s Naren construction (P) Ltd, v. Union of India, [Civil Appeal Nos. 4432-4450 of 2012 arising out of S.L.P. (C) Nos.3499-3517 of 2011]. The para 6 and 7 of the judgement is more relevant and which is as under :

“6. This Court further held that when a person applies for allotment of building site or for a flat constructed by development authority and enters into an agreement with the developer or a contractor, the nature of the transaction is covered by the expression ‘service’ of any description. The housing construction or building activity carried on by a private or statutory body was, therefore, held to be ‘service’ within the meaning of clause (o) of Section 2(1) of the Act as it stood prior to the inclusion of the expression ‘housing construction’ in the definition of ‘service’ by Ordinance No.24 of 1993.
7. In the light of the above pronouncement of this Court the High Court was perfectly justified in holding that the activities of the appellant- company in the present case involving offer of plots for sale to its customers/members with an assurance of development of infrastructure/amenities, lay-out approvals etc. was a ‘service’ within the meaning of clause (o) of Section 2(1) of the Act and would, therefore, be amenable to the jurisdiction of the for a established under the statute.
Having regard to the nature of the transaction between the appellant- company and its customers which involved much more than a simple transfer of a piece of immovable property it is clear that the same constituted ‘service’ within the meaning of the Act. It was not a case where the appellant-company was selling the given property with all advantages and/or disadvantages on “as is where is” basis, as was the position in U.T. Chandigarh Administration and Anr. v. Amarjeet Singh and Ors. (2009) 4 SCC 660.
It is a case where a clear cut assurance was made to the purchasers as to the nature and the extent of development that would be carried out by the appellant-company as a part of the package under which sale of fully developed plots with assured facilities was to be made in favour of the purchasers for valuable consideration. To the extent the transfer of the site with developments in the manner and to the extent indicated earlier was a part of the transaction, the appellant-company had indeed undertaken to provide a service. Any deficiency or defect in such service would make it accountable before the competent consumer forum at the instance of consumers like the respondents.”

So we should be circumspect while dealing with these type of cases and I must say it is the crave of the taxpayer that the GST Council should come up with the necessary clarifications in this regard and which should be in the true spirit of the law framed so that unnecessary litigation can be avoided .

Important Note : The views expressed herein are personal. The above information is only for educational purposes and does not form professional advice. Kindly read law, circular, notification, judgement etc. before acting upon it. Further though due care is taken while preparing the document, possibility of errors cannot be ruled out.


CA. Nikhil Kumar