ORDER

1. M/s Bhopal Smart City Development Corporation Limited ((hereinafter referred to as ‘Applicant’), is a company incorporated under the Companies Act, 2013 with registrar of Companies, Gwalior and with sole objective of Planning and implementing the “Smart City Project” in Bhopal. It is registered with the GST Authorities in the State of Madhya Pradesh and has been granted Registration No 23AAGCB6537N1ZE.

2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.

BRIEF FACTS OF THE CASE AND SUBMISSION OF THE APPLICANTS IN THEIR APPLICATION IS AS UNDER –

3.1. The Applicant is a Public Sector Undertaking. The company is jointly owned by the Government of MP and is equally managed by Madhya Pradesh Urban Development Company Limited (MPUDCL) and Bhopal Municipal Corporation (BMC). The sole objective of Applicant is Planning and implementing the “Smart City Project” in Bhopal.

3.2. Smart City Bhopal Mission and values: The smart city mission of the Government of India seeks to address the issue of urbanization through the transformation of selected cities. The intent is to create sustainable cities that can provide a good quality life to its citizens. Bhopal has been amongst the 20 lighthouse cities with a dramatically different approach which is driven by ‘Redevelopment’ rather than ‘Retrofitting’.

3.3 in pursuance to LAND MONETIZATION SCHEME of Smart City Mission, A RFP for Allotment of Plot on freehold basis for ABD {Area Based Development) Plot No. 79(b) [Area: 9,650.30 Sqm. (0.96503 Ha.)] which is located at Khasra no 116 & 1419, Gram Kotra SuItanabaad, PatwariHalka T.T. Nagar, Tehsil Huzur, District Bhopal had been issued vide Tender No. 159 dated 24-12-2020 by the BSCDCL. (Copy of RFP submitted by the Applicant). The Schedule-I at Page 67 of RFP provides the details of said Plot.

RELEVANT PARA(S) OF RFP ARE AS UNDER:-

3.4 The Plot falls under ABD area, which is envisaged to be developed as Commercial use. (Please refer 1.1.8 of RFP at Page 20).

3.5 The description of the ABD Area (Please refer 1.7 of RFP at Page 21-22) which is as under:

Bhopal is one of the twenty cities to be selected in the first round of smart cities challenge of Government of India (Gol). Bhopal Area Based Development (ABD) proposal includes redevelopment of 342 acre of North & South TT Nagar, which is Also the only redevelopment and rehabilitation project among the 100 smart cities selected by Gol.

The area-based development is proposed to be a state of art smart city in the heart of the city of Bhopal with all modern features in a sustainable manner and would generate more job opportunities. The project area is very well connected to all means of transport like BRTS, Railway station and Airport. Furthermore, it also falls along upcoming MRT axes, with three metro stations within the Ph t area, which would play an important role in commercial development and value of this area. Proximity upper lake and gardens around the city create a connect to the nature and make it a desirable location.

3.6 The project development is mainly focused along two major existing roads and a proposed 45 m Boulevard Street. The Boulevard Street will connect the two proposed commercial nodes at the metro stations. With an approx, investment of 2,500 crores the ABD area has been envisaged to develop with state-of-the-art infrastructure with all the smart features and green technology as per the smart city guidelines. These infrastructures will include 24×7 water supply and power, underground utility corridor, ICT infrastructure, smart street lighting, automated solid waste system, to name a few. 80 % of the buildings in the area will be green rated. An integrated command and control centre will monitor and manage the ABD area as well as entire city.

The Schedule-II at Page 68 of RFP provides the details of PROJECT UTILITIES which is to be provided by the applicant in respect of said Plot.

3.7 Execution of Allotment Letter (Please 8 of RFP at Page 26)

“8.1 The Allotment letter [as per the RFP Part-III] will be issued to the Allottee, after the Selected Bidder has fully complied with the terms of LolD. The Selected Bidder will be referred to as an Allottee in the Allotment letter, after BSCDCL has received the payment of First Instalment of the Sale Price, amounting to 25% (Twenty Five percent] of the sale Price within 60 (Sixty) days from the date of issuance of LolD.

8.2 Please take note that the issuance of Allotment letter does not grants or vests any ownership rights and/ or possession rights over the Plot in favour of the Allottee any manner whatsoever, and BSCDCL shall continue to have complete ownership and possession of Plot /property till entire Sale Price/ sale consideration has been paid by the Allottee to BSCDCL and a Deed of Conveyance has been executed in favour of the Allottee.”

3.8 Execution of Deed of Conveyance :(Please refer 10.1 of RFP at Page 27),-

“10.1 Any time after the payment of the full Sale Price (including the applicable interest, if any) as per the terms of the Allotment letter, the Allottee may approach BSCDCL for execution of the Deed of Conveyance, whereby the ownership of the Plot shall transferred to the Allottee in accordance with the applicable laws. BSCDCL shall execute the Deed of Conveyance within 30 (Thirty) day of receipt of li e written intimation (along with documentary evidence) by the Allottee with regard to the full payment of Sate Price. BSCDCL will release the Performance Security after the execution of the Deed of Conveyance.

10.2 In the event, the Successful Bidder fails to comply with all the terms and conditions provided under the LolD and the Allotment letter within the stipulated period specified therein or extended period, if approved by BSCDCL, the Bid Security and/or any other amounts submitted by the Successful Bidder to BSCDCL shall be forfeited and the Allotment of the Plot shall stand cancelled.

10.3 The Allottee, after due compliance of pre-requisites under the LolD and the Allotment letter within the stipulated period and upon complete payment of the Sate Price along with any interest thereon, will be referred as Buyer in the Deed of Conveyance.

10.4 Subject to timely payment of the Sale Price and compliance with all the terms and conditions of the LolD, Allotment Letter and the Bid Documents, the Deed of Conveyance shall be executed between BSCDCL and the Selected Bidder.

10.5 Stamp Duty in accordance with applicable laws and all applicable taxes including registration costs shall be solely borne by the Buyer at the time of execution of Deed of Conveyance.”

3.9 Commencement of Construction by the Allottee: (please refer 9.0 of REP at page 26-27),-

9.1: In view of the fact that the Selected Bidder/ Allottee shall have no ownership and/ or possession rights over the said Plot unless the entire Sale Price along with the interest accrued if any, has been paid to BSCDCL, the Selected Bidder/ Allottee shall not have any rights to undertake or commence any construction/ development activities on the said Plot and or portray that the Selected Bidder/ Allottee is the owner of the said Plot.

9.2 : Upon execution of the Deed of Conveyance and handover of possession of said Plot by BSCDCL to the Buyer, the Buyer shall fully abide by all the norms with respect to building regulations and permissions (as amended from to time) as per MP Bhumi ViKasNiyam, 2012, Development Control Regulations (DCR) of Bhopal Smart City Development Corporation limited and any other applicable law with respect to Area Based Development (ABD) area/ the Plot, and further, the Buyer shall also fully abide by the applicable Development Plan with respect to the Plot.”

3.10 The Applicant will carry out the development activities on the said plot of kind and also in the ABD area. The development activities include 24X7 water supply and power, underground utility corridor, ICT infrastructure, smart street lighting, automated solid waste system. Apart from this, Applicant will develop and maintain other infrastructure such as 45 m Wide Road (Boulevard Street).

3.11 As per REP, Consideration/Sale Price has been fixed for lumpsum basis i.e. Consolidated price for Developed Plot has been fixed. That is, no segregation into Value of Land and value of development facilities/utilities whether relating to Plotor common facilities in the Area has been made.

3.12 The Allottee (Successful Bidder), after complying with the terms and condition of the REP, Allotment Letter, LOID and Conveyance deed may carry out the remaining construction activities such as civil foundation and construction of structure thereon as per the agreed norms.

3.13 The Project is registered with RERA as Commercial Project vide Letter dated No/324/Reg/RERA12021 dated 05-04-21 bearing Registration No P-BPL-21-282C The Applicant (BSCDCL) is a promoter as per the RERA provisions.

3.14 In case of “Sale of developed plot”, no requirement of obtaining completion certificate has been prescribed in the Local laws.

4. QUESTION RAISED BEFORE THE AUTHORITY –

The Applicant has submitted application u/s 97(1) of CGST Act & MP GST Act seeking Advance Ruling on the following questions;

I) whether GST is applicable on sale of developed plot of land for which consideration is received before the issuance of completion certificate (if any), under the following facts:-

a. The sale of plot is after carrying out the development activities or providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc. which are to be provided by the applicant; and

b. remaining construction activities including civil foundation on the developed plot will be carried out by the buyer on their own account and cost.

II) What is applicable rate of GST on the above Supply, if it is supply of goods or supply or both?

III) What is HSN or SAC of GST on the above Supply, if it is supply of goods of supply or both?

IV) What is the Entry No of the Notification on the above supply or activities or transactions?

V) If answer to the Question No I is decided as supply of goods or services or both, whether the actual value of Land as per Government Guidelines can be excluded from the Total Consideration (or Gross amount charged) and remaining value (i.e. Gross amount charged less Value of Land as per Government Guidelines) represented by value of Development carried out by applicant can be treated as taxable value of supply? if Yes, What will be the Taxable value and what will be rate of GST on such Taxable value?

VI) If answer to the Question No V is negative and answer to the Question No. I is decided as supply of goods or services or both, whether the benefit of Para-Z of Notification No 11/2017 dated 28-06-2017 regarding l/3rd abatement/exclusion on account of the value of transfer of land or undivided share of land from the total amount charged is available to the applicant?

5. DEPARTMENT’S VIEW POINT-

 

6. RECORD OF PERSONAL HEARING-

Mr. S. Krishnan, CA on behalf of Applicant and Shri Atul Shrivastava, Dy. Commissioner, SGST Circle-1, Bhopal, Jurisdictional officer appeared virtually for personal hearing and Shri Krishnan reiterated the submissions already made in the application. Later on applicant also provided the letter issued by NagriyaVikasEvemAvasVibhag M.P by which the land which was transfer by the department to Bhopal Smart City Corporation Limited. The applicant also gave the detail of how the land costing was to be done by the Corporation.

Later on the applicant also sent a letter stating that the provision relating to obtaining the completion certificate is not applicable in respect of the project being executed by the applicant, in support of his statement the applicant also included a photocopy of letter dated 03-11-2001 issued by the Municipal Corporation Bhopal to the applicant in which the corporation has stated that the completion certificate is issued under the provisions of Madhya Pradesh Nagar PalikaAdhiniyam, 1956 only in respect of such building in respect of which building permission has been issued lo the said building by the building permission department of the Municipal Corporation.

7. DISCUSSIONS AND FINDINGS –

7.1 We have carefully considered the submissions made by the applicant in the application, the pleadings on behalf of the Applicant made during the course of personal hearing and the Department’s view provided by the jurisdictional officer.

7.1.1. It is important to mention here that in the fact no. a on which applicant has based Question no. 1, he has while mentioning the amenities that is going to be provided by him, he has used the abbreviation etc. As the abbreviation etc. has a very broad connotation and may include many thing which can have adverse impact on the ruling. Hence this authority has not considering the abbreviation etc. while giving its ruling below. And limit its observation only to those amenities which are mentioned explicitly by the applicant.

7.2 The applicant had filed the application seeking ruling on questions staled in para 4 above. We shall take up the questions in the order in which they have been put before us and accordingly, we shall discuss the applicability of GST on the sale of Developed Plot of land for which consideration is received before issuance oi completion certificate.

7.3 Before the question put forth by the applicant is discussed, we feel it is pertinent to discuss the taxability of land per se under the GST Laws.

7.3.1 Supply which attracts GST is defined u/s 7 of the GST Laws. Section 7(1) contains an inclusive list of what constitutes supply, while Section 7(2) lists out what does not constitute supply. Further, Section 7(2) begins with a non- obstante clause thus overriding the provisions of Section 7(1).

7.3.2 Thus, except for activities listed in Schedule III and those notified in terms of Section 7(2)(b), all other activities amount to supply,

7.3.3 Entry No 5 in Schedule III states as under:

“5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II. sale of building.”

Thus sale of land, per se, is out of the purview of GST on account of it not being a supply.

7.4 Apparent intention of legislature:

7.4.1 Section 2(52) which defines Goods excludes Land from its purview by stating that goods means movable property. The definition is as under:-

(52) “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply ;

7.4.2 The definition of Service given in Section 2(102) however seems to include land in its purview in so far as it states that services means anything other than goods. The relevant text is as under:-

(102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination. to another form, currency or denomination for which a separate consideration is charged;

7.4.3 This interpretation of supply of land being a supply of service seems grossly absurd and should have been hit by the Rule of Absurdity, but by virtue of Entry No. 5 in Schedule III. this absurdity seems to have been prevented. Entry No. 5 states as under:-

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Thus, Sale of Land has been treated to be neither a supply of service nor a supply of goods.

7.4.4 The law has recognized that there may be instances of sale of land as part and parcel of a transaction, which is exigible to GST. Thus, while arriving at the value of construction services, where the value at which the building is being transferred includes value of land or undivided share in land, abatement of 1/3rd of the total value of the transaction is provided to exclude the value of land vide para 2 of Notification No. 11/2017 – ST.

7 4.5 The intention of the legislature is thus clear regarding exclusion of land from the purview of GST and accordingly, it is beyond doubt that there is no GST on the sale of land per se by excluding sale of land from the definition of supply.

7.5 Once it is established that GST is not leviable on sale of land on account of sale of land not being supply, we need to examine what constitutes land and whether in the given facts of the case, the supply is of something other than land. It is pertinent to note that the moot question here is whether there is sale of anything other than land since the query stales that the plot has been sold after carrying out the development activities or providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc.

7.5.1 Sale presupposes transfer of ownership and the definition of sale under different acts refer to a transfer of ownership. Transfer of ownership creates right in one person’s favour to the exclusion of all others.

7.5.2. under the Sale of Goods Act, 1930. sale is defined in Section 4 as under:

“Sale and agreement to sell.- (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.”

7.5.3. Sale of Land is governed by the Transfer of Property Act. 1882 and Section 54 of the said act states as under:

“54. “Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.”

7.5.4. Further, In CIT v. Motors and General Stores (P.) Ltd. – (1967) 66 ITR 692 it was held that ‘sale’ is a transfer of ownership in immovable property for a money consideration. Therefore, transfer of ownership is the essence of sale.

7.5.5. It has been stated in the question that the sale of the plot is after carrying out the development activities or providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc. This development work does not get transferred to the buyer of the plot of land. The development work is a common amenity, which is to be enjoyed b people at large who own the adjacent parcel of land as well as all such persons who have a right of way. Thus, in this case, the subject matter of sale is the land only and not the development work done.

7.5.6. Hon’ble Karnataka Appellate Tribunal in the case of Continental Builders and Developers v. State of Karnataka, 2009 (67) Kar. L. J 359 (Tri) (FB) examined the issue whether development of plots and sale, is works contract or not under Karnataka Sales Tax Act, 1957. The Tribunal had held that,

“Civic amenities work done by land developer, there is no transfer of property in goods to the site purchasers either collectively or individually.”

7.5.7. The development work done on the land is for the whole parcel of land and not for a given plot, which is sold to the customers. The title in the common area and amenities does not belong to the owners of the plot but rests with the Urban Local Body as per the applicable laws. Further, there are easement rights and right of way to be granted, which further show that there is no collective ownership of the common amenities with the plot owners or any association of such plot owners.

7.5.8. For these reasons, it appears that the provision of common amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc to the buyers of the plot of land does not have any bearing on the taxability or otherwise of the sale of plot after carrying on the development work for providing amenities stated supra.

7.6 Definition of land:

7.6.1 The term Land has not been defined under the GST Laws and therefore recourse is to be had of other act and judicial pronouncements in this regard. Land has been the subject to much litigation and has been defined in many acts. While we look at the definition given in the different acts, we gave to keep in mind that each act has a purpose and interpretation of a word in the context of one act may not be suitable for another act.

7.6.2 There are numerous provisions in allied acts which state that land includes the benefits to arise out of land and things attached to earth or permanently fastened to anything attached to the earth. The following definitions are relevant:-

Land as per the Land Acquisition Act, 1894, is as under:

3 (a) the expression” land” includes benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth;

Land as per the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is as under:

3 (p) land includes benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth;

As per Madhya Pradesh Land Revenue Code, 1959 –

2(k) “land” means a portion of the earth’s surface whether or not under water; and, where land is referred to in this Code, it shall be deemed to include all things attached to or permanently fastened to any thing attached to such land;

7.6.3 From the above definitions, it is clear that the developmental work on the plot of land being sold is subsumed in land itself and ceases to have a separate identity. It cannot be bought and sold as something distinct and separate from the plot of land.

7.7 The term “Land” has not been defined under the GST Laws and therefore, in the absence of a definition in a statue, the meaning of land has to be construed in its popular sense.

7.7.1 Land may be qualified by its use or nature like agricultural, fallow, urban, rural, industrial, commercial or residential, but it remains land. The end result of the activity of development of land does not result in a Building or Complex. In the Trade Parlance developed land is also known as land.

7.7.2 It is no more res integra that words used in taxing statutes in respect of items should be interpreted in the way in which it is understood by people conversant with the subject matter of the statute, unless statute prescribes a specific definition. Scientific and technical meaning should not be applied but popular meaning should be applied as legislature does not suppose the merchants to be geologists, botanists or naturalists. – CCE v. Krishna Carbon Paper Co. 1988 taxmann.com 620

7.8 The question raised by the applicant is qualified by the phrase “issuance of completion certificate”. In this regard, we have to say that from the discussion above, it is clear that development of land is not akin to construction of a complex or building. The concept of obtaining a completion certificate is applicable to the construction of a complex or building and not to development of land, so far as GST is concerned. Therefore, it is immaterial whether any money is received by the applicant from prospective buyers before development of plots is completed and a completion certificate is received by the applicant from the appropriate authority.

7.9 Principles of interpretation of Statutes, Deeds and Documents refer to an Absurdity Limit, which states that a statute cannot be interpreted literally if it would lead to an absurd result. As discussed above, there is no concept of obtaining completion certificate in case of development of land since development of land is not akin to construction of a building or a complex. Therefore, if development and sale of such developed land by a person is treated to be a taxable supply distinct from sale of land, then each subsequent sale of such parcel / plot of land would also become a taxable supply which makes the interpretation give an absurd result.

8 Ruling

8.1 On the basis of above discussion, in respect of Question – I regarding applicability of GST on sale of developed land (the applicant has declared that no completion certificate is required for the project) for the reasons stated above, it is ruled that the sale of developed land, by the applicant as per the facts provided by him where the development work is limited to providing common amenities ( common drainage, water line, electricity line, land levelling, road and street light) and no development work will be done by the applicant after the sale of the developed land and if no advance from the customer for undertaking development activities is taken then it does not constitute a supply within the meaning of Section 7 of the GST Laws and therefore GST is not applicable on such sale.

8.2 In respect of the other questions raised, in light of the ruling regarding Question – I, they have become redundant and therefore no ruling is required to be passed in respect of other questions raised.

8.3 The ruling is valid subject to the provisions under section 103 (2) until and unless declared void under Section 104 (1) of the GST Act.