MP High Court asks BDA to analyse whether GST deserves to be levied on developed plot

November 5, 2022

GST on developed land plot is again in news as Madhya Pradesh High Court has asked the local authority to reconsider its decision to levy 12 per cent GST on such a piece of land. Experts expect that this ruling will end the dispute on this issue and also become precedent for other litigations.

This is probably first ruling by a High Court on the issue of applicability of GST on developed plots after GST Council in its June meeting recommend no GST on the developed plots. However, service provided for development of land like levelling laying of drainage lines (as may be received by developers) will attract GST at applicable rate for such services.

Developed plots means a piece of land sold after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. Since, there is no GST on land sell, there have been issues related with GST on developed piece of land. The matter got complicated after various States’ Authorities for Advance Rulings (AAR) gave contradictory ruling on this issue. After this, matter reached GST Council and finally a circular was issued in August.


A division bench comprising Justices Sheel Nagu and Prakash Chandra Gupta said in a recent ruling: “It would be appropriate that the Bhopal Development Authority (BDA) applies its mind again on the question as to whether GST deserves to be levied in given facts and circumstances or no.” The Authority has been given 60 days to come out with its decision.

A group of petitioners approached the High Court after they got land allotment notices last November and December from BDA and by which GST @ 12 per cent was levied upon the sale consideration for purchase of developed land. During the pendency of this matter, attention of the bench was drawn upon the circular, and accordingly, it disposed the matter.

Contentious issue

Charanya Lakshmikumaran, Partner with Lakshmikumaran and Sridharan Attorneys says sale of land has been kept outside the purview of GST. However, GST on sale of levelled land has been a contentious issue and the advance ruling by the Gujarat Advance Ruling Authority in December 2021 was leading to discordant understanding wherein the issue was decided against the assessee.

“The issue was discussed during the 47th GST Council Meeting and in a welcome move the issue was clarified by CBIC that no GST would be applicable on sale of levelled land. The judgment by Madhya Pradesh High Court has taken the clarification forward in the right direction which will hopefully end the dispute,” she said.

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