The applicability of Goods and Services Tax (GST) on commercial land transactions in India depends on the nature of the transaction, whether the land is developed or undeveloped, and whether additional services or construction are bundled with the sale. GST provisions are governed by the Central Goods and Services Tax (CGST) Act, 2017, and related notifications issued by the GST Council.
1. GST on Sale of Undeveloped Commercial Land
- The sale of land, whether residential or commercial, is considered a transaction in immovable property.
- According to Schedule III of the CGST Act, the sale of land is neither a supply of goods nor a supply of services.
- Therefore, the outright sale of commercial land without any development or construction activity is exempt from GST.
2. GST on Developed Land or Plotted Land Sales
- If the land is sold as a developed parcel (e.g., with infrastructure like roads, water supply, drainage, streetlights, boundary walls), the transaction may attract GST.
- In such cases, it may be treated as a composite supply of land and development services.
- GST may be applicable only on the value of development services, not the land value.
- This treatment is subject to whether the developer is registered and providing taxable services.
3. GST on Joint Development Agreements (JDAs)
- In JDAs, where a landowner provides land and a developer provides construction, GST is applicable on the construction portion.
- The developer is liable to pay GST on the value of constructed area given to the landowner.
- The landowner, if transferring development rights to the developer, may also attract GST liability unless exempted through specific notifications.
4. GST on Lease of Commercial Land
- If commercial land is leased out, GST is applicable on the lease rentals under the category of “renting of immovable property for business purposes.”
- The applicable GST rate is generally 18%.
- The landlord must be registered under GST if the lease income exceeds the threshold limit (₹20 lakhs for most states, ₹10 lakhs for special category states).
5. GST on Commercial Land with Pre-Construction Bookings
- If a developer sells units or plots during the development phase (before completion certificate is issued), GST may apply.
- This is treated as a supply of works contract service, and the applicable rate is typically 5% or 12%, depending on the nature of the structure being developed.
- Once the construction is completed and a completion certificate is obtained, no GST applies on sale.
6. GST Input Tax Credit (ITC) Consideration
- Developers undertaking construction on commercial land and offering services (such as leasing or fit-outs) are eligible to claim Input Tax Credit on GST paid for materials and services.
- However, if the final sale is exempt (as in pure land sale), no ITC can be claimed.
7. Exclusions Under Stamp Duty and Registration Charges
- GST is independent of stamp duty and registration fees, which are still payable under state laws on the total transaction value.
These statutory charges are not subsumed under GST and must be paid separately.
