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Published on:
February 23, 2023
By
Prerna

GST on Sale of Developed Plots by Land Owner Before Completion Certificate

GST or Goods and Services Tax is a value-added tax levied on the supply of goods and services in India. It is a comprehensive, multi-stage, destination-based tax that was introduced on 1st July 2017. GST has replaced many indirect taxes that were applied at various stages of the supply chain.

The sale of developed plots by landowners before the completion certificate is a complex transaction that comes under the ambit of GST. In this article, we will discuss the various aspects of GST applicable to the sale of developed plots by landowners before the completion certificate.

Definition of Developed Plots and Landowners

Developed plots refer to the plots that have been developed or constructed by the landowner or any other person on the land. The construction could be for residential, commercial, or industrial purposes. A landowner is a person who owns the land on which the developed plots are constructed.

GST Applicable on Sale of Developed Plots

The sale of developed plots by landowners before the completion certificate is a taxable event under GST. The transaction is considered as a supply of goods as defined in Section 7 of the Central Goods and Services Tax Act (CGST Act), 2017.

The CGST Act defines goods as "every kind of movable property other than money and securities". As developed plots are immovable property, they are not considered as goods under GST. However, the sale of developed plots is considered as a taxable service as per Section 2(102) of the CGST Act, 2017.

The sale of developed plots by landowners before the completion certificate attracts the standard rate of GST, which is currently 18%. The GST liability is calculated on the value of the consideration received or receivable by the landowner for the sale of developed plots.

Exemptions from GST on Sale of Developed Plots

There are certain exemptions from GST on the sale of developed plots by landowners before the completion certificate. These include:

1. Transactions where the consideration received or receivable by the landowner for the sale of developed plots is less than Rs. 20 lakhs in a financial year. These transactions are exempt from GST under the threshold exemption limit.

2. Transactions where the developed plots are used for agricultural purposes. Such transactions are exempt from GST under Schedule III of the CGST Act, 2017.

Input Tax Credit (ITC) on Sale of Developed Plots

Input tax credit is a mechanism to avoid the cascading effect of taxes. It allows the taxpayer to claim credit for the taxes paid on the purchase of goods or services used for the furtherance of business. In the case of the sale of developed plots by landowners before the completion certificate, the landowner is not eligible to claim input tax credit.

Conclusion

The sale of developed plots by landowners before the completion certificate is a taxable event under GST. The landowner is liable to pay GST on the value of the consideration received or receivable for the sale of developed plots. However, there are certain exemptions from GST in certain cases. It is important for landowners to understand the GST implications of such transactions to avoid any tax-related issues in the future.

GST or Goods and Services Tax is a value-added tax levied on the supply of goods and services in India. The sale of developed plots by landowners before the completion certificate is a complex transaction that comes under the ambit of GST. The article discusses the various aspects of GST applicable to the sale of developed plots by landowners before the completion certificate. TaxationGSTgst-on-sale-of-developed-plots-by-landowner-before-completion-certificate

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Updated on:
March 16, 2024