Joint Development Agreement GST rate

[JIGAR SHAH]

A developer has entered into a joint development agreement with the land owner. As per the agreement the developer has the right to sell the developed land into plots to the final customer. The developer receives the total sale consideration and out of that he gives the agreed proportionate land cost on sales consideration as land cost to the land owner.

What will be the rate of GST?

• The developer charged 18% i.e. 18% on the total receipt less 1/3 of land cost; thus effective rate will be 12%; or
• Flat 18% on the total receipts including land cost.

[HariKishan Bhonagiri]

As per the terms you referred the it cannot be JDA. it is a revenue sharing arrangement. In order to consider the JDA the land share is to passed on to the land lord and the risk, reward and rights over the land of his portion after development with the Land lord. where as in your case the right is transferred to developer and he developing the land selling and sharing his share. Hence as per my view it cannot be subjected to GST. if any body differs please let me know the reason and logic.

[JIGAR SHAH]

Dear Mr Harikrishna,

Thank you for the response towards the query.

AI Summary

GST treatment of joint development vs revenue sharing arrangements determines whether developer receipts are taxable or excluded. The issue is whether GST applies and at what rate where a developer sells developed plots, collects total sale proceeds, and pays the landowner an agreed proportionate share as land cost. A respondent views the transaction as a revenue sharing arrangement-not a joint development in kind-on the basis that the landowner does not retain post development rights, and therefore suggests it may not be subject to GST; the tax consequence hinges on factual characterisation of the arrangement.