GST on Sale of Land After Levelling, Laying Down of Drainage Lines, etc.

Introduction :

Goods and Services Tax (GST) was introduced in India to bring about a uniform tax structure across the country. It is an indirect tax that is levied on the supply of goods and services. The GST system is designed to simplify the tax process for businesses and reduce tax evasion. However, the application of GST can be complex, especially in cases involving the sale of land and buildings. In this article, we will discuss the GST implications on the sale of land after levelling, laying down of drainage lines, and other developments.

Understanding GST :

GST is a value-added tax that is levied on goods and services at every stage of the supply chain, from the manufacturer or service provider to the end consumer. It is a destination-based tax, which means that the tax is levied at the final point of consumption. The GST system has four tax slabs – 5%, 12%, 18%, and 28%. The tax rate applicable to a particular good or service depends on its classification under the GST regime.

GST on the Sale of Land :

The sale of land is generally exempted from GST. However, certain transactions involving land may attract GST, such as the sale of land after levelling, laying down of drainage lines, and other developments. The GST on such transactions is applicable only if the land is sold within three years of the completion of the development.

If the land is sold after three years of the completion of the development, GST would not apply. This is because the sale of immovable property after three years of its development is considered as a sale of a capital asset, and is exempted from GST.

Calculation of GST on Sale of Land After Levelling, Laying Down of Drainage Lines, etc. :

The GST on the sale of land after levelling, laying down of drainage lines, and other developments is calculated on the value of the land as well as the value of the development work. The value of the land is based on the stamp duty paid or the circle rate, whichever is higher. The value of the development work is the actual amount spent on the development work.

For example, if the value of the land is Rs. 50 lakhs, and the value of the development work is Rs. 20 lakhs, the total value of the transaction would be Rs. 70 lakhs. If the applicable GST rate is 18%, the GST payable on the transaction would be Rs. 12.6 lakhs (18% of Rs. 70 lakhs).

Conclusion :

In conclusion, the sale of land after levelling, laying down of drainage lines, and other developments may attract GST if the land is sold within three years of the completion of the development work. The GST is calculated on the value of the land as well as the value of the development work. Business owners and startup founders in India should be aware of the GST implications on such transactions to avoid any tax liabilities.