Goods & Services Tax (GST) in IndiaLevy of Goods and Services Tax on Immovable Property

October 26, 20210


The Goods and Services Tax (GST) regime was introduced in the year 2017 via the 101st Amendment to the Constitution of India. The intended objective behind bringing this Amendment was to simplify and streamline the Indirect Tax regime in the country. Many extant Indirect Taxes such as Excise Duty, Value Added Tax, Service Tax etc. were swapped with the single, comprehensive and destination-based tax i.e. GST to attain the objective of “One Nation, One Tax”.

Therefore, GST, being an Indirect Tax, is applicable on all forms of Supply of Goods and Services as mentioned under the Schedule II of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) except those activities or transactions that are mentioned in Schedule III of the CGST Act.

Interestingly, Immovable Property is one such item that is mentioned in both the Schedule II and Schedule III of the CGST Act. It means that there are some supply of goods and services relating to Immovable Property that are exempted from levy of tax while some are not.

This apparent contradiction has caused a huge dilemma in the minds of taxpayers because of the complexity that has been attached to the transactions relating to immovable property under the CGST Act.

The concept of supply of goods and services in relation to Immovable Property, the types of Immovable Property that are exigible to tax and exceptions to those properties, the concept of transfer of development rights – which is a crucial aspect of immovable property in the current context – and the enigma attached to it under the CGST Act are discussed hereunder.



1. Meaning of Goods and Services

The CGST Act has been introduced to consolidate the provisions for levying and collecting tax on the intra-state supply of goods or services. The term ‘Goods’ has been defined under the Sub-Clause(52) of Section 2 as every kind of movable property not being money but includes actionable claims, growing crops, grass and things attached or forming part of the land that can be severed before supply or under a contract of supply”.

On the other hand, the term ‘Services’ has been defined under the Sub-Clause (102) of Section 2 as anything other than goods, money, securities but includes activities that involves the use of money or its conversion either in case or any other mode or both under Section 9 (3), (4) or Section 5 (3) (4) of the Integrated Goods and Services Tax”.

The abovementioned definitions suggest that Immovable Property cannot be subjected to GST as it is not included in the definition of Goods. However, the scope of the word Services is wide enough to include certain transactions relating to Immovable Property in its ambit. To ensure that taxpayers are not met with a conundrum while interpreting these two terms, the scope of Supply has been exhaustively dealt with under Section 7of the CGST Act.


2. Scope of Supply of Goods and Services

Section 7 (1) delves into the expression ‘Supply’ and states that all forms of goods and services, such as exchange, sale, license, transfer, and lease etc., when agreed to be done in the course or furtherance of business, would fall under the ambit of this term.

To amplify the scope of ‘Supply’, Legislators inserted Sub- sections 1A to Section 7 of the CGST Act through an Amendment which says that all activities that have been mentioned in Schedule II are to be treated as Supply of Services which also includes Land and Building in its purview.

Under Schedule II, Paragraphs 2 and 5 read as follows, respectively:


a) Any lease, tenancy, easement , license to occupy land falls under the supply of services;

b) Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.


a) Renting of immovable property;

b) Construction of a complex, building civil structure or a part thereof, including a complex or building intended for a sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, by the competent authority or after its first occupation whichever is earlier.”

However, sub-section (2) of Section 7 of the CGST Act exemplifies those activities that cannot be covered under the scope of Supply. It states that the activities mentioned under Schedule III and the activities done by the Central/State/Local Government in the furtherance of the public interest are not to be treated as Supply of Goods or Services.

Schedule III lists out all those activities that are not to be treated as Supply of Goods and Services which also includes Sale of Land and Sale of Building. However, the latter is subject to the condition mentioned under Clause (b) of Paragraph 5 of Schedule II.

Under Schedule III, Paragraph 5 reads as:

“Sale of Land and subject to Clause (b) of Paragraph 5 of Schedule II, Sale of Building is not to be treated as Supply of Goods or Services.”

On the conjoint reading of the Schedules in respect of Immovable Property implies that while the Sale of Land which includes transfer of title and ownership under Section 54 of the Transfer of Property Act, 1882 (‘TP Act’) is excluded from the ambit of GST in its entirety.

However, the Supply of Services in relation to Immovable Property concerning rent, lease, tenancy, easement, licensed properties and under-construction projects fall within the purview of GST and still attract GST.



1. Immovable Property not Chargeable under GST

Schedule III lists out the Immovable Properties that are not subject to GST. It states that Sale of Land and Building, latter being subject to the conditions mentioned under Clause (b) of Paragraph 5 of Schedule II, does not attract GST on them.

The idea behind exempting the Sale of Land from applicability of GST is that it is neither covered under the Supply of Goods nor under the Supply of Services and since it involves the transfer of title and ownership under TP Act, it only attracts Stamp Duty.

However, if Sale of Land includes other services such as an electricity line, land levelling, water line, etc., like in the case of sale of plots, then it falls under Paragraph 5 of Schedule II and would attract GST. It is clearly mentioned under Clause (b) of Paragraph 5 under Schedule II that construction of complex or building or civil structure would attract GST except where the entire consideration is received after Completion Certificate.

That the West Bengal Authority for Advance Rulings (‘AAR’) in In re Enfield Apparels Ltd (Order Number 05/WBAAR/2020-21) while discussing Section 7 and Schedule II of the CGST Act, interpreted the term ‘Immovable Property’. The AAR observed that the sale of Immovable Property involves transfer of ownership and title in the name of Applicant and upon receiving the said property, he/she would enjoy all the rights over the said property, including the right to further transfer it, unlike when a Sale of Land is made for lease, license, rent as provided under Section 7 which attracts GST.

Similarly, Sale of Building is not exigible to tax when consideration is received after obtaining the Completion Certificate which means that Ready-to-Move-In Flats do not attract tax. However, if construction is in process then the allotted building would be charged with tax as mentioned under Clause (b) of Paragraph 5 of Schedule II.


2. Immovable Property, Chargeable under GST

 Schedule II deals with all those activities that are to be treated as Supply of Goods or Services and it includes Sale of Land and Building as a Service under Paragraph II, when done for the purpose of lease, license, easements, rent including letting out of the building for commercial, industrial or residential complex for business purpose, either in whole or in parts. Additionally, it also includes renting of immovable property and construction of complex, building, civil structure as Supply of Service under Paragraph 5. This means that if immovable property is used for the purposes as mentioned under Schedule II, it would be treated as Supply of Services and would attract GST.

However, there are certain exceptions to these activities as per Notification No 12 dated 28.06.2017 as under:

  1. As per Serial No. 12 of the Notification – If the immovable property is rented for residential purposes then it is exempted from of GST.
  2. As per Serial No. 41 of the Notification – when an Industrial Plot is provided for the lease term of thirty or more years by the State Government Industrial Development Corporation or its undertaking then such transactions are exempted under GST and no tax can be levied on that.

Since the CGST Act is still in the nascent stages of its development and in the process of accommodating the extant lacunae in the law, Schedule II and relevant notifications in this regards are yet to grasp the attention of Judicial Authorities.

So far, there is only one judgement from the Bombay High Court, in the case of Builders Association of Navi Mumbai v. Union of India (W.P. No. 12194 of 2017), wherein it was held that the head ‘Land and Building’ provided under Schedule II is to be read harmoniously and the activities mentioned therein being Supply of Services shall attract taxpayers liability to pay GST.

Interestingly, Schedule II has attracted the attention of several AARs of different states. It was decided by the Rajasthan AAR and West Bengal AAR in the case of In re Greentech Mega FoodPark (Raj/AAR/2019-20/10) and In re Enfield Apparels Ltd.(Order Number 05/WBAAR/2020-21) respectively that the activities mentioned in Schedule II in relation to immovable properties are covered under scope of Supply of Services and are not the simple Sale of Land and Building that is exempted under Schedule II and hence, shall be taxed as ‘other activities’.



Transfer of Development Rights is one such area which needs attention of the legislators as it has not been defined in any the legislations, neither in the GST Regime, nor in the erstwhile laws and, thus, the meaning to this term has only been understood in the sense as assigned by judicial authorities so far.

It was decided by the Bombay High Court in Chheda Housing Development v. Bibijan Shaikh Farid and Ors. [(2007), 3 Mah LJ 402], that “transfer of Development Rights being a benefit arising from the land consequently must be held to be Immovable Property”. The Court derived this meaning on the basis of the definition given under Section 3 (26) of the General Clauses Act, 1897 that defines Immovable Property to include land and benefits arising out of that land and, in the opinion of the Court “transfer of development rights are considered as rights that arises from the land thus it being the benefit arising out of the land is considered to be an immovable property.”

Pursuant to the above decision of the Bombay High Court, there already exists a huge dilemma pertaining to the issue of taxability of Immovable Property, the taxpayers considered “Transfer of Development Rights” to be an exemption mentioned under Schedule III that says that ‘Sale of Land’ is exempted under the CGST Act. However, to fall under the ambit of ‘Sale of Land’, it is imperative to fall under the TP Act to avail the benefit of exemption as only such sale of land is exempted as is covered under Section 54 of the Act.

Therefore, this gave rise to a new debate, as to “whether or not the transfer of development rights being an immovable property is included in the TP Act or whether it shall be exempted under Schedule III of the CGST Act?” However, there is no settled position of law so far which determines the finality of transfer of development rights in relation to immovable property.

Logically, the term ‘Immovable Property’ includes both, land as well as benefits arising from that land and thus, it is rational enough to include transfer of development rights as land also and not just benefits arising out of the land. However, this is a gray area which requires the attention of the legislature or the judiciary in this regard.



The taxability of Immovable Property under CGST Act is one such crucial area that needs urgent consideration from the concerned stakeholders. In this regard, several provisions have been laid down in the CGST Act and its Schedule. However, these provisions and the relevant Schedule need to be interpreted appropriately in order to bring clarity to the levy of GST on immovable property.

For example, if an Immovable Property is located in more than one state then all the states will be considered as place of supplies in proportion in value of services including the ancillary services; the states will share GST in proportion to the value of services.

But there are not enough judicial precedents that address the issues arising from these provisions. Also, the transfer of development rights being an immovable property needs attention of the concerned authorities so that all the perplexity surrounding these transactions can be ended.

 TEAM AMLEGALS, assisted by Ms. Damini Chouhan (Intern)

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