In Advance Ruling No. KAR ADRG 19/ 2023- AAR - Godrej Properties not liable to charge GST on sale of plots and basic infrastructure development charges; GST applicable on other common amenities and facilities charges: AAR (Karnataka)Members Dr. M.P. Ravi Prasad (State) & Kiran Reddy T (Central) [26-04-2023]

Read Order: In re: M/s. Godrej Properties Limited

LE Correspondent

Bangalore, May 19, 2023: The Karnataka bench of the Authority for Advance Rulings has ruled that M/s. Godrej Properties Limited (applicant) was not liable to charge GST on the sale of plots and basic infrastructure development charges. However, the applicant was liable to charge GST on the charges related to other common amenities and facilities.

The applicant, engaged in the development of plots, sought an advance ruling on whether they are liable to charge GST on various components related to the sale of plots, including the sale of the plot itself, basic infrastructure development charges, and charges for other common amenities and facilities, if the booking of plot, receipt of consideration and agreement for sale was entered as well as sale deed was executed after the release certificate.

The Authority noted that the consideration received for the plot area falls under Entry 5 of Schedule III of the Goods and Services Tax (GST) Act, as a result, this transaction was not considered a supply of goods or services for the purpose of GST. Therefore, the applicant was not liable to charge GST on sale of plot.

The Authority further held that the applicant was not liable to charge GST on Basic Infrastructure Development charges, as these were mandatory requirement for release of plots and the plots become the saleable plots only after the provision of these basic infrastructure and facilities. Hence, they are a part and parcel of the consideration for the plot, though collected and shown separately.

The Authority held that the applicant was liable to charge GST on other common amenities and facilities charges, noting that the applicant was collecting Estimated Other Charges in advance on behalf of the future service provider, which was treated as a deposit in the invoice. The amount collected was non-refundable and was adjusted towards future services to be provided to the plot owners. Since the amount collected was in the nature of an advance and was non-refundable, and the promoter was in control of the services until the new service provider was employed and handed over, the Authority ruled that it qualified as a service provided and hence was a supply by the applicant.