GST ON LAND DEVELOPMENT RIGHTS

[KUNAL DESAI]

There are following 2 queries from my end.

1. Whether GST RCM would be applicable on FSI paid to Local Authority as per Entry -4 of 12/2017-CT(R)?

Whether will it make any difference if 'Local Authority' was removed from the entry vide Notification No. 14/2018-CT(R) dated 26.07.2018 so as to change position from 26/07/2018 to 31/03/2019?

2. What would be the position of taxability in the case of Land Development Rights given to Developer for Developed Plots wherein Landowner and Developer firm are related party transactions meaning thereby Landowner are partner in the partnership firm of the developer firm?

What would be the valuation for such Rights ignoring the principle that the GST is not to be paid on Land or Plots thereof?

[Rachit Agarwal]

FSI paid to Local Authority- Such Payment are exempted. Such activity fall under Serial No- 2 of 12th schedule of Article 243W of the Constitution and exempted under Serial No 4 of the Notification No- 12/2017 dated 28.06.2017 taxability in the case of Land Development Rights given to Developer- Land Development Rights are in nature of benefit arising from Land. Benefit arising from Land is treated as Immovable Property. As the supply of Immovable Property falls under Schedule III to Section 7 of CGST Act, 2017 hence such supply is nieher goods nor services.

However AAR has treated the same as supply of service.

If the assessee treats the same as service, Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter- Notification No- 4/2019-C.T. (Rate), dated 29-3-2019

[KUNAL DESAI]

Dear Rachit,

1. Whether will it make any difference if "Local Authority" was removed from the entry vide Notification No.14/2018-CT(R) dated 26.07.2018 so as to change position from 26/07/2018 to 31/03/2019?

2. What would be the valuation for such Rights ignoring the principle that the GST is not to be paid on Land or Plots thereof?

[KUNAL DESAI]

and most importantly in my 2nd Question, Land Owners and Developers are related parties.

[alok rungta]

dear sir

is only services (with out supply to any goods) taken against land development and bill amount of services being capitalized , in above situation is Input Credit is Eligible to avail or should be Inventories, please clarify

[alok rungta]

dear sir

is only services (without supply of any goods) taken against land development and bill amount of services being capitalized , in above situation is Input Credit is Eligible to avail or should be Inventories, please clarify

AI Summary

Valuation of development rights: treated as supply only if service, valued by reference to similar apartments charged to independent buyers. Payments for FSI to local authorities are treated as exempt under the relevant notification and local authority functions; removal of 'local authority' from a later notification raises transitional uncertainty. Land development rights are described as benefits arising from land and therefore immovable property under Schedule III (neither goods nor services), but prior rulings have treated them as services; if so, valuation is fixed by reference to similar apartments' prices charged to independent buyers nearest the transfer date. Related party transfers and input tax credit on capitalised development services are noted as open practitioner questions.