Liability for GST & Service Tax under Joint Development Agreement: Authority's Ruling

The Authority ruled that the applicant is liable to pay GST on building construction under the Joint Development Agreement as per Notification No. 4/2018-Central Tax (Rate). The determination of GST value in the absence of monetary consideration is guided by Notification No. 11/2017-Central Tax (Rate), with the land value deemed as one third of the total amount. Regarding the liability to pay service tax, the applicant is required to pay service tax pre-GST implementation under the Finance Act 1994 and GST post-GST under the CGST/KGST Act 2017 based on the timeline of service provision.

---

---

Issues:
1. Liability to pay GST on building construction under Joint Development Agreement
2. Determination of GST value in absence of monetary consideration
3. Liability to pay service tax pre-GST and GST post-GST

Analysis:

Issue 1: Liability to pay GST on building construction under Joint Development Agreement
The applicant sought clarification on the GST liability for constructing and handing over a building to the landowner under a Joint Development Agreement. The Authority considered the applicant's submissions and relevant provisions. Notification No. 4/2018-Central Tax (Rate) dated 25.01.2018 specifies that a registered person supplying construction services against transfer of development rights is liable to pay GST. The applicant, being a registered person, falls under this category and is obligated to pay GST on the construction service provided to the landowner.

Issue 2: Determination of GST value in absence of monetary consideration
The applicant raised a query regarding the determination of GST value when no monetary consideration is involved. The Authority referred to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which outlines the valuation method for services involving property transfer. As per the notification, the value of the supply shall be the total amount charged less the value of the land, with the land value deemed as one third of the total amount. This method provides clarity on determining the GST value in such scenarios.

Issue 3: Liability to pay service tax pre-GST and GST post-GST
The applicant inquired about the liability to pay service tax pre-GST implementation and GST post-GST regime. The Authority analyzed Section 142(11) of the CGST/KGST Act 2017, which mandates the payment of service tax under the Finance Act 1994 for services provided pre-GST and GST under the CGST Act 2017/KGST Act 2017 for services post-GST. Therefore, the ruling states that the applicant is liable to pay service tax/GST proportionate to the services provided before/after 30.06.2017, respectively.

In conclusion, the Authority ruled that the applicant is liable to pay GST on the building construction under the Joint Development Agreement, the GST value is to be determined as per the specified notification, and the applicant is responsible for paying service tax/GST based on the timeline of service provision.

---