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Published on:

November 22, 2024

Viraaj Vashishth

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Basics of GST

GST on Sale of Land and Plots

Tax complexities and problems of GST on sale of land and plots can be best handled by understanding the related aspects. It would be relevant to mention that the sale of land and plots or any other type of properties can be subject to the ambit of the Goods and Services Tax (GST) regime but not every plot is liable to GST. Some types may be exempt while others may have specific rates. This article attempts to look at GST treatment, charging computation and filing for purposes of selling of land and Gst on plot sale in India.

Introduction to GST on Real Estate

In India, the objectives served by the introduction of GST were to establish simplified and uniform taxation across the sectors. The application of GST within real estate, however, varies tremendously depending on the type of property, the nature of the transaction and the level of development. Such understanding of GST structure assists both buyers and sellers to comply efficiently and make their decisions armed with enough vital information.

What Is Considered as Land and Plot for GST Purpose?

The terms ‘land’ and ‘plots’ even though are often used interchangeably under GST has different meanings which vary according to the use and level of development of the property.

1. Vacant Land: Land without infrastructure or construction.

2. Developed Plots: They are plots where provisions for roads, water systems or electric lines have been made.

These definitions help in the application of GST because they indicate whether a particular transaction is treated as burdened with tax or exempted from tax.

Types of Land Transactions Under GST

1. Taxable: Sale of developed land and plots, commercial land with added amenities.

2. Exempt: Sale of undeveloped land or agricultural land.

Such classification is considerable as GST is not applicable or useful to all land transactions, with exclusions especially to agricultural and vacant lands.

GST Applicability on Different Types of Land Sales

It is clear that there are various categories of land and these attract different treatment in terms of GST.

1. Vacant land: Generally, they are sold with little or no development and therefore are rarely sold with working GST.

2. Developed plots: Such plots are usually taxed under GST when the basic amenities such as roads and street lights are for the resident’s welfare.

3. Agricultural Land: Agricultural Land is also not subject to GST as per the present law.

4. Residential and Commercial: Here also, commercial developed plots attract tax and may also depend on the residential level of development and the basic amenities offered.

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You may also read: GST on Sale of Fixed Assets

GST Rates on Sale of Land and Plots

It is worth noting that rates of sale of land also attract GST which is essential for determining the figure to remit as this is done through fractions. There are few types of rates which are effective:

Land Type	GST Applicability	GST Rate
Vacant Land	Exempt	0%
Developed Plot	Taxable	18% on development cost
Agricultural Land	Exempt	0%
Residential Developed Plot	Partially Taxable	Depends on development

Table: Overview of GST Rates on Land Types

GST on Sale of Developed Plots

GST is paid when a particular amount of infrastructure such as roads or water systems and electricity is built into the plot. It’s normal for GST on such developed plot forms to range from 18% of the amount added by the devastation.

GST on Agricultural Land and Related Exemptions

GST has no application on agricultural land which is defined as land whose primary use is farming. If the land is put to other uses, it may be liable for taxation.

How To Calculate Gst On Sale Of Land

When determining GST, one takes into account the status of development of the particular plot, the type of transaction and the rates applicable. This is what it is like stepwise:

1. Determine the Land Type: The land may be undeveloped or developed or it may be agricultural land.

2. Determine the Development Value: In case of developed plots, the GST value is chargeable on the infrastructure cost.

3. Rate Establishment: Charged at the applicable GST rate (say 18% when applied to developed plots).

Developed Land GST Calculation Example

Let’s assume a developer sells a parcel with the basic building turnover being Rs.10,00,000. This means that the computation of the GST would be as shown below:

Description	Value
Infrastructure Cost	Rs.10,00,000
GST Rate	18%
GST Amount	Rs.1,80,000
Total Sale Price	Rs.11,80,000

GST Compliance for Land and GST on Plot Sale Transactions

It is applicable for both buyers and sellers and it includes getting registered and issuing invoices. Sound documentation enhances efficiency in transactions and minimizes the chances of an audit trail.

Filing GST Returns for Land Sales

Selling any taxable land necessitates the filing of returns and payment of the GST collected. Here’s how to do it:

1. Issue an invoice: One needs to issue an invoice which conforms with the requirements of GST.

2. Record in GST Returns: The transaction information should be recorded in the monthly returns.

3. Pay the GST: The payment of the GST collected should not be delayed beyond the deadline date.

What the Buyers and the Sellers need to know

While transacting land under GST, the following should be noted:

1. Have an understanding of the exemptions: A positive assertion should be made whether or not the land meets the criteria for being exempt.

2. Development valuation should be most realistic and within range: GST should be assessed solely on the cost of development.

3. Mistakes in compliance that are common should be avoided: This includes the proper manner of filing returns so as not to incur sanctions in the future.

Conclusion: Navigating GST on Land Purchase and Plot Sales

In summary, all parties buying and selling land or plots should be aware of the application of GST on Sale of Land and Plots when transacting in the real estate market. Limited GST applies on the sale of land, as it directly applies to developed plots with infrastructure development overhead.

Many transactions, however, such as the sale of agricultural or vacant types of land, enjoy exemption. In the case of a taxable transaction, GST will be applicable only on the selling price of the plot and not on the development cost which is 18 % in India.

Real estate owners and investors will suffer costs such as those incurred in heavy penalties in case of ignorance of how to compute GST on land sales. The same concerns compliance measures such as the submission of Returns and ensuring proper records in the transactions.

FAQs

1. Inclusive of GST, is the sale of vacant land?

No. The sale of vacant land is generally free of GST.

2. How does GST have an impact on the sale of developed sites?

GST is charged at the rate of 18% on the expense incurred in creating sites with infrastructure facilities.

3. How much tax is paid in GST when selling agricultural land?

According to present tax regulations, agricultural land is not subject to the provisions of GST.

4. On residential land plots, will the GST be imposed?

If the plot is sold together with amenities, even if not developed, amenities GST may be applicable.

5. In what manner should I compute the GST on plot sale.

Apply the GST at the prescribed rate on the amount of the consideration for the infrastructure facilities provided.

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