The implementation of Goods and Services Tax (GST) on 1st July 2017 was a landmark event in the history of Indian taxation. It subsumed all indirect taxes levied on goods and services by the Central and State Governments into one unified tax structure. This reform also impacted on the real estate sector.
This blog provides clarity on GST rates applicable for the simple sale of land versus plotted developments under the new tax regime. SPA Group will evaluate how land and plots are treated differently under GST, analyze applicable tax rates, and discuss the impact on buyers as well as investors dealing in these asset classes. The insight would enable prudent decision-making with respect to land and plot investments in the post-GST implementation era.
Understanding of GST in Real Estate
As per a key ruling by the Authority for Advance Rulings (AAR), the sale of a vacant plot of land with no amenities would involve only the transfer of title rights and ownership. This would not constitute as a ‘supply of service’ and hence does not attract GST.
However, if the land plot is sold with certain developed amenities, such as the laying of pipelines, roads, cables, etc., then it involves an additional element of service. As per Clause 5(b) of Schedule-II of the CGST Act, 2017, construction of any building, complex, civil infrastructure or part thereof which is intended for sale to a buyer falls under the definition of ‘supply of service. Hence, the sale of plotted developments with amenities would be liable for GST charges.
Further, Schedule III of the CGST Act clarifies the sale of vacant land or real estate property without any construction as an ‘immovable property’ not in the purview of the supply of goods or services. Thus, no GST applies to the straightforward sale of open plots of land without any development. Only stamp duty is payable in such cases.
The Verdict on Land and Plotted Development
As a result, if a real estate developer promotes just demarcated land without any amenities, no GST is applicable to the plot cost. However, if basic amenities are provided in the plotted development, 18% GST applies on the developed component, which includes charges for laying pipes, cables, driveway etc. So, while buying a vacant plot attracts only stamp duty, plotted developments would have specific GST liability on the development charges. This distinction influences budgeting done by buyers and investors dealing in land and plots.
SPA Environments for a Worry-less Investment
To summarize, while land attracts no GST, plotted developments are subject to 18% GST due to value addition through development. This difference has implications for both buyers and investors. Understanding GST applicability can help in better decision-making when it comes to investing in land or plotted developments.
If you are seeking high-quality villa plots Sarjapur road, SPA Group offers premium amenities and urban living spaces that make for attractive investment options. For discerning homebuyers, buying a plot at SPA comes as a transparent process where homebuyers can invest with complete peace of mind. SPA plots come with access to world-class amenities for an extraordinary lifestyle.
