2019 (8) TMI 395 - AAR - GST

Applicant Liable for GST on Joint Development Agreement Work

In Re: M/s. Durga Projects and Infra Structure Private Limited

The ruling determined that the applicant is liable to pay GST for the work executed under the Joint Development Agreement (JDA) on the landowner's ... Levy of GST - work executed under JDA on land owner's portion where work commenced during pre- GST and continued under GST Law - Valuation for payment of tax for such supply - time of supply - HELD THAT:- The supply of construction service provided by the applicant to the land owner is in the nature of Barter - the applicant received the consideratin in the form of developement rights which is other than money and qualifies to be Consideration. therefore in the instant case the supply is in the form of barter and the consideration is in the form of developement rights and is in the course of furtherance of business - the activity falls squarely falls under 'supply' under CGST Act, 2017. Value of supply - HELD THAT:- The value for levy of tax is to be determined in terms of para 2 of N/N. 11/2017-CT (Rate) dated 28-06-2017. Time of supply - HELD THAT:- The construction commenced during pre-GST regime and continued thereafter. Further the applicant has not furnished any information as to whether the applicant has transferred the possession of the land owner's share of flats or not. Hence it is inferred that the possession of the land owners share of flats has not been given to the land owner. Therefore the aid possession obviously would happen during GST regime and hence would attract applicable GST - In terms of N/N. 4/2018-CT(Rate) dated 25-1-2018 the time of supply would fall under the purview of GST law. The Applicant is liable to pay GST towards work executed under Joint Development Agreement on Land owner's portion, on the value to be arrived at in terms of para 2 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 at the time of transfer Of possession of the land owners' portion of the fiats. Issues Involved:1. GST liability on work executed under Joint Development Agreement (JDA) on landowner's portion where work commenced during pre-GST and continued under GST Law.2. Valuation for payment of GST.3. Time of supply for GST applicability.Detailed Analysis:1. GST Liability on Work Executed Under JDA:The primary issue is whether the applicant is liable for GST on the construction service provided to the landowner under a Joint Development Agreement (JDA) where the construction commenced before the GST regime and continued into the GST regime. The applicant argued that the transaction should be considered as barter, which falls under the definition of 'Supply' as per Section 7 of the CGST Act 2017. The consideration received by the applicant is in the form of development rights, which qualifies as 'consideration' under Section 2(31) of the CGST Act 2017. Therefore, the activity is considered a 'Supply' and is liable for GST under Section 9 of the CGST Act 2017.2. Valuation for Payment of GST:The value of the supply is to be determined as per Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. The value of the service involving the transfer of property in land or undivided share of land shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, deemed to be one-third of the total amount charged for such supply.3. Time of Supply for GST Applicability:The applicant contended that tax should be levied under the earlier law for the work executed before the GST regime and under the GST law for the work executed after the GST regime. However, as per Notification No.4/2018-Central Tax (Rate) dated 25.01.2018, the liability to pay GST arises at the time when the developer transfers possession or the right in the constructed complex to the landowner. Since the possession of the landowner's share of flats has not been transferred yet, the entire tax liability falls under the GST law.Conclusion:The ruling concluded that the applicant is liable to pay GST for the work executed under the JDA on the landowner's portion. The value for GST payment should be determined as per para 2 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. The time of supply falls under the GST regime, making the entire tax liability applicable under GST law.