Rrendering services to farmer by the builder towrds sale of developed Plots

[OmPrakash jain]

Land sale by builder(Developer) on behalf of land owner (Farmer) as per Joint development agreement (JDA). Sharing of revenue at specified ratio per JDA. Land development charges paid by builder (Developer) without any ownership transfer of Land. Whether any GST is leviable on the share of builder towards sale of plot on behalf of farmer. The farmer & Builder are registered persons under GST & Developed Plots have been sold after grant of completion certificates. Two Advance ruling authorities have levied GST on the share of builder towards sale of plots treating sale proceeds as consideration for rendering services to farmer by the builder.

[YAGAY and SUN]

The Advance Rulings may be used as reference but it is not issued by your State GST Authority then there is no jurisdiction of these Advance Ruling. For this you will have to obtain AR by freezing facts of matter related to your clients.

[OmPrakash jain]

Sir,

Leave apart Advance rulings, convey your logic in the given situation as to what should be the treatment of consideration received by the builder and share retained by him as per JDA. Whether it tantamount to rendering services to farmer by the builder.

[YAGAY and SUN]

Dear Sir,

Following three Notification are important in relation to your query: -

1. Notification no. 3/2019 – Central Tax (Rate) dt. 29th March, 2019 – Rate of Tax
2. Notification no. 5/2019 – Central Tax (Rate) dated 29th March, 2019. – Reverse Charge Mechanism
3. Notification no. 6/2019 – Central Tax (Rate) dated 29th March, 2019, - Time of Supply

In our view tax is payable by the developer under RCM.

[OmPrakash jain]

Sir,

All the three notfns are not applicable in the example cited by me since the farmer & Builder are registered persons under GST & Developed Plots have been sold by builder after grant of completion certificates & builder is not having ownership of land.

[CA Seshukumar]

Hi all

Primafacie the land is fully owned by farmer only.

Builder has developed the same with his idea and in turn for developing so called land instead of consideration in money he got right to retain the proceeds of specific number of plots.

So , after selling all share of plots the money will be retained by builder which is his consideration for providing development service.

Hence builder need to issue invoice to farmer for the consideration that he realized along with tax.

From farmer point of view, sale of land to consumers are not taxable and hence farmer can't take this credit.

[CA Seshukumar]

And also since it is continuous supply of service and which ia driven by payments on account of sale of plots. The time of supply will be the time of selling each plot by the builder as part of his share.

[OmPrakash jain]

Sir,

No one has critically evaluated the subject in the light of entry 5 of Schedule III, where sale of land has not been treated as supply.

AI Summary

Consideration for development services may attract GST, requiring developer invoicing and raising RCM and time-of-supply issues.
Whether the developer's retained share of sale proceeds under a Joint Development Agreement is consideration for development service subject to GST is the core issue. One advisory view treats tax as payable under the Reverse Charge Mechanism; another treats the retention as taxable consideration requiring the developer to issue invoices and account for tax, with time of supply on sale of each plot. The applicability of Schedule III entry 5 (sale of land not treated as supply) is raised but not resolved.