TMI Blog2020 (5) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... s and such other orders as are required to procure the Sanctioned Plan. Further, in case the Appellant-Developer intends to modify the plans, the landowner shall obtain the required modifications to the sanctioned plan. The Appellant-Developer shall develop the project on the property subject to the obtaining of the sanctioned plan by the owners. Therefore, it is evident that the onus is on the landowner to comply with the provisions of Section 32 of the Karnataka Urban Development Authorities Act. It is the owner of the schedule property who agrees to transfer the ownership of the roads, drains, water supply mains, parks and open spaces, civic amenity areas to the Urban Development Authority. The Appellant-Developer has no role to play in obtaining the sanctions and in transfer of ownership. Therefore, this argument of the Appellant does not hold good. While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner. Therefore, the activity of developing the land is a supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertaining the value of land and supply of service? 5. The Karnataka Authority for Advance Ruling vide ruling No KAR ADRG NO 119/2019 dated 30-09-2019 = 2019 (11) TMI 994 - AUTHORITY FOR ADVANCE RULING, KARNATAKA held as follows: The activities as envisaged in the agreement between the Appellant and the Land Owners amount to supply of service and is liable to be taxed under GST. Rule 31 applies in the instant case and the value of the supply equals to the total amount received by the Applicant, which is equal to 25% of the market value of each plot. 6. Aggrieved by the above ruling, the appellant has filed this appeal on the following grounds. 6.1. The Appellant submitted that, there is nothing in JDA which give rise to the contention that, Appellant had agreed to supply service to the Land Owners; that in terms of Section 9 of GST Law, GST is levied on the supply of goods or services or both. The term Supply' is defined elaborately in Section 7 of the Act to include all forms of supply goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the principal supply is land and development activity is incidental to the main principal supply, therefore sale of land does not attract tax under GST; that, sale of land is excluded from the scope of supply , under Entry No. 5 of III Schedule; that applying the provisions of composite supply' and 'principal supply' as defined in Sections 2(30) and 2 (91) of the CGST Act, to their case, they submitted that, the predominant activity is sale of land and development activity is incidental to the sale of land. Moreover, the development activity is naturally bundled with sale of land. In other words, it is integrally connected with sale of land, and therefore, sale of Developed Plot is nothing but sale of land, which falls under Entry 5 of III Schedule to the Act, and therefore does not attract tax under GST. 6.4. The Appellant further submitted that, as per sub-section (5) Section 32 of Karnataka Urban Development Authorities Act, 1987, a person who forms lay-outs is required to transfer the ownership of the roads, drains, water supply mains, parks and open spaces, civic amenity areas to the authority, permanently without claiming any compensation thereof; tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the extent of 25% of total revenue, which is obtained / derived from JDA, it can be considered that Appellant has ownership right in the property. In support of the above submissions, Appellant rely on the Hon'ble Supreme Court decision in the case of SUNIL Vs CIT AIR 1986 SC 368 = 1985 (9) TMI 7 - SUPREME COURT , wherein it was held that, in its general sense, the expression transfer of property connotes the passing of rights in the property from one person to another. In one case there may be a passing of the entire bundle of rights from the transferor to the transferee. In another case, the transfer may consist of one of the estates only out of all the estates comprising the totality of rights in property. In a third case, there may be reduction of the exclusive interest in the totality of rights of the original owner into a joint or shared interest with other persons. To the extent to which the exclusive interest is reduced to a shared interest it would seem that there is a transfer of interest. Therefore, when a partner brings in his personal asset into the capital of the partnership firm as his contribution to its capital, he reduces his exclusive rights in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is communicated to the aggrieved party. The proviso to Section 100(2) empowers this Authority to condone the delay in filing the appeal by another period of 30 days. In this case, the due date for filing the appeal was 20-12-2019 but the Appellant has filed the appeal on the 1 st January 2020 after a delay of 21 days from the due date for filing appeal. The Appellant has stated that the delay had occurred since the Director in charge of taxation matters and the Consultant were busy with filing of annual GST returns and annual accounts under Company law. Considering the submissions made by the Appellant, the delay in filing the appeal is hereby condoned in exercise of the power vested in terms of the proviso to Section 100(2) of the CGST Act. 10. The issue to be decided in this appeal is whether the activity of development and sale of land by the Appellant is a liable to tax under GST. The liability to GST arises when there is a supply of either goods or services or both. According to section 7 of CGST Act, 2017, the expression supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Appellant-developer shall develop the project according to the sanctioned plan. The Appellant engages engineers, contractors, other professionals and workmen to execute the development work. All costs of execution of the project subsequent to receipt of the sanctioned plan including the cost of fees payable to the architects, contractors, staff, workmen, etc shall be borne and paid for by the Appellant-Developer. All cost incurred by the Appellant-Developer including the GST, stamp duty, registration fee, any other taxes shall be recoverable by the Appellant-Developer from the purchasers of the plots in the project. The Appellant-Developer is required to complete the project within a period of 18 months from the date of receipt of the sanctioned plan. The Appellant-Developer shall be responsible for the maintenance of the property and the project till the project completion. The landowner has authorised the Appellant-Developer to sell the sites in the project and share the revenue out of the sale proceeds in the agreed upon revenue sharing ration. The Appellant-Developer is entitled to erect sign board on the property advertising the sale and disposal of plots in the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: taxable supply means a supply of goods or services or both which is leviable to tax under this Act; Sub-section (47) of section 2 defines an exempt supply as under: exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply; In the instant case there are two activities involved, viz: development of land and sale of plots. The transaction relating to the sale of land is not a supply of either goods or service under GST (entry 5 of Schedule III of the CGST Act refers). This activity of sale of land cannot be considered as an 'exempt supply' for the reason that the activity is not at all a supply and hence the question exempting it under Section 11 of the Act does not arise. On the other hand, the activity of development of land is a supply in terms of Section 7 of the CGST Act. A combination of two activities one of which is not a supply under GST cannot be said to be a composite supply. We therefore, disagree with this contention of the Appellant. 14. The Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement by both the parties to jointly develop the land and share the revenues out of the sale of land. In real estate transactions involving plotted development, one party owns the land and another party has the expertise to develop the land. The two parties come together with the common intention of developing the land and sharing the revenue accruing for the sale of the developed plots in the land. However, the landowners give the rights of using the land to the developer in exchange for which, the developer gives the service of developing the land of the owners. While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner. Therefore, we hold that the activity of developing the land is a supply of service by the Appellant. 16. We therefore, do not interfere with the findings of the lower Authority on the question of taxability of the activity of development and sale of land and also the finding on the question relating to the value of supply. 17. In view of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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