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Activity of development and sale of land under Joint Development Agreement liable to be taxed under GST.

Levy of GSTThe issue to be decided in this appeal is whether the activity of development and sale of land by the Appellant is a liable to tax under GST. The liability to GST arises when there is a supply of either goods or services or both. According to section 7 of CGST Act, 2017, the expression “supply” includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, and includes activities specified in Schedule II to the CGST Act, 2017. However, as per entry 5 of Schedule III, the activity of sale of land has been treated as neither a supply of goods nor a supply of service. It is the contention of the Appellant that they are primarily engaged in the sale of land which has been developed by them and the development activity is incidental to the sale of land and hence they are not liable to GST in terms of the Schedule III of the CGST Act.

As per lower authority appellant and the Land Owners amount to supply of service and is liable to be taxed under GST.

Held that—In real estate transactions involving plotted development, one party owns the land and another party has the expertise to develop the land. The two parties come together with the common intention of developing the land and sharing the revenue accruing for the sale of the developed plots in the land. However, the landowners give the rights of using the land to the developer in exchange for which, the developer gives the service of developing the land of the owners. While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner. Therefore, we hold that the activity of developing the land is a supply of service by the Appellant.

We therefore, do not interfere with the findings of the lower Authority on the question of taxability of the activity of development and sale of land and also the finding on the question relating to the value of supply.
Held that—Maarq Spaces Private Limited, In Re… [2020] 24 TAXLOK.COM 012 (AAAR-Karnataka)

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