When Is GST Applicable on Land Purchase?
When Is GST Applicable on Land Purchase?
Is GST Applicable on Agricultural Land?
No, GST is not applicable on the sale of agricultural land. According to Schedule III of the CGST Act, the sale of land is neither considered a supply of goods nor services, and thus, is outside the purview of GST. Specifically, agricultural land in rural areas is exempt from GST, and even in urban areas, if the land is used for agricultural purposes, it remains outside the GST ambit.
Does GST Apply to Non-Agricultural (NA) Land?
The sale of non-agricultural land, in its undeveloped form, is also exempt from GST. However, complexities arise when the land undergoes development. If the land is sold after significant development—such as leveling, laying of drainage lines, water lines, electricity, etc.—then GST may be applicable on the development charges.
What About Plotted Development Schemes with Amenities?
In plotted development schemes where developers provide amenities like roads, drainage, water supply, and electricity, GST becomes applicable. The sale of such developed plots is treated as a supply of service, and GST is levied on the development charges. The applicable GST rate in such cases is typically 18%.
How Does GST Impact Joint Development Agreements (JDAs)?
In JDAs, where landowners collaborate with developers to develop land and share the resulting plots or revenue, GST implications are significant. The transfer of development rights by the landowner to the developer is considered a supply under GST, and thus, taxable. The developer is liable to pay GST on the construction services provided to the landowner. The GST rate applicable in such scenarios is 18%.
Is TDS Applicable on Land Purchases Above ₹50 Lakhs?
Yes, under Section 194-IA of the Income Tax Act, if the consideration for the transfer of immovable property (other than agricultural land) exceeds ₹50 lakhs, the buyer is required to deduct TDS at 1% of the total sale consideration. This TDS must be deposited with the government within 30 days from the end of the month in which the deduction is made. It’s important to note that TDS is applicable on the entire sale amount, not just the amount exceeding ₹50 lakhs.
Are There Any Recent Clarifications or Circulars on This Matter?
Yes, the CBIC issued Circular No. 177/09/2022-GST, which clarifies that the sale of developed plots, where basic infrastructure is provided, is not subject to GST. However, this circular has led to some confusion, as it doesn’t clearly define the extent of development that would keep the transaction outside the GST net. Therefore, while the circular provides some relief, it’s advisable to consult with tax professionals for specific cases.
