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?

AI Summary

GST Applicability Dispute in Development Agreement: Does It Qualify as 'Supply' Under GST Act? An individual questioned the applicability of GST on a development agreement with a builder, arguing that since the transaction is not in the course of business, GST should not apply. The individual believes the transaction does not meet the definition of 'supply' under the GST Act. Two respondents disagreed, citing the CGST Act's broad definition of business transactions, which includes irregular transactions. One respondent acknowledged the complexity, noting that while GST might not seem appropriate for personal transactions, the significant amounts involved could attract tax scrutiny, suggesting a strategic approach based on the transaction's size and potential litigation risks.