Notified valuation rule prevails for joint development agreements; actual construction cost does not override the prescribed GST method.

Paragraph 2A of Notification No. 3/2019-Central Tax (Rate), as amended, was held to apply to a joint development agreement involving transfer of undivided land share and development rights to a promoter in exchange for constructed flats and monetary consideration. The levy arose on completion of construction under Notification No. 6/2019-Central Tax (Rate), and by that time the prescribed valuation mechanism governed the supply. The availability of actual construction cost did not displace the notified deeming method, which requires valuation by reference to the amount charged for similar apartments to independent buyers, less the prescribed land value. The transaction was therefore required to be valued under paragraph 2A.

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Issues: (i) Whether paragraph 2A of Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 applies to the joint development agreement with unregistered landowners and whether it governs valuation of construction service in such transaction. (ii) Whether the notification ceases to apply merely because the actual cost of construction is available.

Issue (i): Whether paragraph 2A of Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 applies to the joint development agreement with unregistered landowners and whether it governs valuation of construction service in such transaction.

Analysis: The agreement showed that the landowners transferred undivided share in land and development rights to the developer in return for constructed flats and monetary consideration. The levy was held to arise on the date of completion of construction under Notification No. 6/2019-Central Tax (Rate), not on the date of the agreement. By the relevant time, paragraph 2A as amended applied to transfers of development rights to a promoter, and the valuation mechanism prescribed therein was held to cover the transaction.

Conclusion: The issue is decided against the applicant and in favour of the Revenue.

Issue (ii): Whether the notification ceases to apply merely because the actual cost of construction is available.

Analysis: Paragraph 2A prescribes a specific deeming method for valuation by reference to the total amount charged for similar apartments from independent buyers, less land value as prescribed. Once that statutory valuation method applies, the availability of actual cost does not displace the notified mechanism.

Conclusion: The issue is decided against the applicant and in favour of the Revenue.

Final Conclusion: The notified valuation mechanism under paragraph 2A governs the transaction, and the applicant must adopt the prescribed deemed value for the construction service.

Ratio Decidendi: Where a notified valuation rule specifically prescribes the method for a class of supplies, that prescribed valuation prevails over actual cost-based valuation for the covered transaction, and the time of supply is determined by the notification governing completion of the project.

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