Gst applicability to land owner and developer

[ShankarDurgaVaraPrasad P]

Good morning every body,

My query is -- My client is a builder, his nature of business is taking land from land owners for development and he constructs apartments. on 01/04/2017 builder and land owner came into an development agreement and in that agreement their ratio mentioned as 50:50. The land owner had the right to transfer his share of flats on his own. Whatever the capital gains and service tax(gst) liable in case of owner had to be born by the land owner himself. These were the points mentioned in the agreement. Completion certificate got by builder in the month of december 2018 . Now my query is this agreement done before introduction of gst. Whether gst applicable or not. if applicable what is tax consequence in the hands of land owner and builder. kindly give clarity and guide me. thanks in advance.

[Alkesh Jani]

Sir,

In this regards, Please refer Section 142(10) of CGST Act, 2017. In this regards, my point of view is that for the amount for which VAT/S.T. is already paid, is to be deducted and for amount received after the appointed day GST is payable.

Thanks

[KASTURI SETHI]

I agree with Sh.Alkesh Jani Ji. The period prior to 1.7.17 is covered under sub-section 10 , "save as otherwise ----------------".

(10) Save as otherwise provided in this Chapter, the goods or services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under the provisions of this Act.

[Atul Rathod]

I understand that question is related to development right given by land owner to developer. Development right is not taxable in previous regime. Though for the collection for the flats , would go with the view of above experts.

[KASTURI SETHI]

Sh. Shankar Durga Vara Prasad P is requested to go through Board's Circular Nos.151/2/2012-ST dated 10.2.12 and 354/311/2015-TRU dated 20.1.16 thoroughly (word for word) regarding the leviability of Service Tax on 'Transfer of Development Rights' for the period prior to 1.7.17.

AI Summary

GST applicability on supplies under pre-appointed-day contracts may tax post-appointed-day consideration affecting developers and landowners. GST applies to supplies made pursuant to contracts entered into before the appointed day where performance or receipts occur after that day; amounts on which VAT or service tax was already paid should be deducted when computing GST on post appointed day consideration. In development agreements allocating constructed flats and tax burdens between developer and landowner, receipts received after the appointed day are chargeable to GST to the extent not covered by prior indirect tax, while antecedent service tax treatment of transfer of development rights should be checked against relevant circulars.