47th GST Council Meeting | Impact Analysis for Real Estate Sector

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  • Last Updated on 4 July, 2022

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Real Estate Sector; GST Council Meeting

Vivek Laddha, Manish Kumar Gupta & Dinesh Doshi – [2022] 140 taxmann.com 37 (Article)

Introduction

47th GST Council Meeting came up with a number of developments that are going to provide a far-reaching impact on the various segments of industries and their stakeholders.
We hereby put our analysis on the issues addressed by the Press Release pertaining to the real estate sector. This is part 1 of the series.
This article is meant to analyse for clarification provided that the sale of land after leveling, laying down of drainage lines, etc. is the sale of land and does not attract GST.
Disclaimer:
It is stated that the Press Release contains the gist of certain matters for clarification. Of course, these matters will be crystallized with the publication of the circular. This article is authored based on the reading of the Press Release only. Authors and publishers shall not be responsible for the decisions taken based on this document.

Background

Schedule III of CGST Act/ State GST Act states that the sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building shall be treated neither as a supply of goods nor a supply of services and thereby GST is not leviable on the sale of land.
GST law has got this issue in legacy from service tax regime about the Sale of land after the development of land* into plots / Sale of plotted land and has been debated a lot whether the development activities would be subject to GST or not in such a case.
*Development of land consists of leveling, road construction, drainage, electricity, water line, demarcation of plots, laying the underground cables, fencing etc.
This issue was also debated before Gujarat Authority for Advance Ruling in the case of Shree Dipesh Anil Kumar Naik where it is held that sale of developed plot is not equivalent to sale of land a treated as construction services under para 5(b) of Schedule II of CGST Act/Gujarat GST Act.
Post this advance ruling, the department aggressively started to issue the show cause notices in various corners of the country by alleging that the sale of the developed plot is subject to GST.
GST Council took up this matter to provide the clarity that the sale of land after leveling, laying down of drainage lines etc. is the sale of land and does not attract GST.
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