GST on Development agreement

[Ritesh Mehta]

An individual enters into development agreement with a builder for a consideration of X amount.

The Consideration is completely in cash and not kind.

Not. No.4/2018 Dtd.25/01/18 mandates GST on development rights to be paid by registered person on consideration recd. from builder.

My take on this is that GST shall not be applicable as it is not a Supply Per Se.

If read with Sec. 7, which defines supply to be in the course or furtherance of business.

It is not a business for that individual to enter into agreement with the builder. It was his one of the land on which development rights have been supplied to builder for cash consideration

But since it is not a business and moreover in course or furtherance of business, the test for Supply fails and hence no GST.

Views Please?

[SHARAD ANADA]

Business is defined under sec. 2(17) of CGST Act 2017. As per the definition 2(17)(c)

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; So in my view it's a business transaction

[Spudarjunan S]

Dear Sir,

By strict reading of law,I would second the view of Shri.Sharad Anada Ji.

But on another side it is not proper to levy GST on personal transaction like this where the assessee has to pay a lumpsum income tax under capital gains. However, since the amount involved in these transactions are humongous the revenue don't want to exude the tax amount involved.

The decision has to be taken either aggressive or conservative depending on the amount involved and the consent of the assessee where he is ready for the elongated litigation with a peril on the interest amount involved.

AI Summary

GST on development rights may apply where transfer of rights qualifies as a business supply under the Act. Whether GST applies to a lump sum cash consideration for development rights depends on whether that transfer is a supply in the course or furtherance of business; Section 2(17)'s broad definition of 'business' supports treating such transfers as taxable, while a narrower personal transaction view disputes GST applicability, raising practical tensions with capital gains tax and litigation risk.