GST will be levied on sale of land for which primary amenities - such as drainage, waterline and electricity - have been provided by real estate developer, the Authority for Advance Ruling (AAR) has said.

The AAR has also concluded that sale of developed plots will be covered under the clause 'construction of a complex intended for sale to a buyer' and accordingly GST would be levied.

An applicant had approached the Gujarat bench of AAR on whether Goods and Services Tax (GST) is applicable on sale of plot of land for which, as per the requirement of approved by the respective authority (i.e. Jila Panchayat), primary amenities such as, drainage line, water line, electricity line, land levelling etc. are to be provided by the applicant.

According to the advance ruling authority, the sale of developed plots is a scheme which involves forming the land into layout after obtaining necessary plan approval from the development authority, collecting all other required permissions, and completing the layout comprising individual sites. Besides, such plots are developed after levelling of land, construction of boundary wall and roads, laying of underground cables, water pipelines and sewerage lines apart from other developments such as landscaped gardens, drainage system, water harvesting system, demarcation of individual plots and construction of overhead tanks, etc.

The AAR, while passing the ruling, said that the applicant sells the developed land as plots and the sale price includes cost of land, as well as price of amenities on a proportionate basis.

While AAR rulings are applicable only to the individual applicant and the jurisdictional tax officer in a particular case, industry experts say this ruling will likely be used as a precedent by other jurisdictions.

According to the quasi-judicial body, the sale of ‘developed plots’ where primary amenities like power, water pipelines or even access roads are included, is not the same as the sale of land.

However, this ruling would have a direct, immediate, and adverse impact on the entire real estate sector, which intends to take away the tax neutral status awarded to the sale of developed plots. This ruling goes against the basic framework of GST which restricts to the taxation of moveable Goods and services. Constitutionally, GST cannot be levied on transactions in immovable property.