| Question And Answer | |
|---|---|
| Subject: | GST ON SALE OF RIGHT ACCQUIRED IN LAND |
| Category: | GST |
| Querist: | CA KARAN SHAH |
| Answered by: | Advocate C.B.Thakar |
| Tags: | GST, sale of land |
| Date: | September 11, 2021 |
ASSESSEE EXECUTED BANAKHAT (AGREEMENT TO PURCHASE LAND) FOR TOKEN CONSIDERATION OF RS. 10 LACS. NOW ORIGINAL OWNER IS SELLING LAND TO THID PARTY AND ASSESSEE RECEIVES RS. 30 LACS AS CONSIDERATION FOR SELLING/RELINQUISHING RIGHTS IN THE LAND BY CANCELLING ORIGINAL AGREEMENT TO PURCHASE.
WHETHER SUCH SUM RECEIVED FOR WITHDRAWING RIGHTS IN LAND WILL BE CHARGEABLE TO GST? IF YES, WHAT AMOUNT WILL BE TAXABLE – ONLY THE PROFIT MARGIN (RS. 20 LACS) OR ENTIRE CONSIDERATION AND AT WHAT RATE IT WILL BE TAXABLE?
The sale of land is outside scope of GST as per entry 5 in Schedule III of CGST Act.
The said entry reads as under:
“5. Sale of land and, subject to clause (b) of paragraph 5 Schedule II, sale of building.”
Rs.30 lakhs are being received for relinquishing right and as rightly stated in query it will amount to sale of accrued right. This sale cannot be termed to be sale of land.
Therefore, it will be taxable supply as Service.
However, if the above transaction in not a regular activity of querist, but only one of transaction as investment etc., a stand can be taken that it is not in course of ‘business’ and hence liability will not attract.
If, however, it is transaction in regular course of business activity then the liability will accrue as discussed above. The supply will be taxable @ 18%. There is no provision to reduce consideration by cost. Therefore, on full consideration of Rs.30 lakhs, tax, as above, will be payable.