GST on Land Owner's share

[Kavali Ramanjeneyulu]

Sir, Land Owner entered into deveopment agreement with the developer for construction of residential complex. Developer's share is 7 flats and paid gst on his portion of 7 flats and land owner's share is 5 flats . The developer paid GST on 4 flats and claimed exemption on 1 flat as it was sold after getting Occupation certificate before . The above issue pertains to the the period prior to 31.03.2019.In this clarification may please be provided on the following:

1. on the land owner's share , who is required to pay GST whether land owner or developer

2. If Developer is to pay GST on Land Owner's share, what is the value to be adopted for payment of GST

3. Whether exemption for flats sold after getting OC is applicable to land owner's share of flats.

Relevant Notifications/ Circulars/AAR may please be provided.

[Shilpi Jain]

1. On LO's share the developer is liable to pay to the department. If the agreement has a clause or if the LO agrees, this can be collected from the LO as well.

2. Open market value of the service provided to the LO.

3. For this liability, sale of units before or after OC has no relevance.

[Vijay kumar]

3. We need to see the Point of Taxation here. The PoT in such cases is governed by Nofn.4/2018-GST dt.25.1.2018 which was applicable prior to 1.4.2019. Accordingly, the question of exemption on LO's share of flats may not arise.

[KASTURI SETHI]

2019 (20) G.S.T.L. 181 (A.A.R. - GST) = 2018 (12) TMI 535 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA IN RE : PATRICK BERNARDINZ D’SA

[KASTURI SETHI]

On this very issue, also see AAR, Haryana Advance Ruling Order dated 5.10.18 Applicant : Informage Realty Pvt. Ltd, Gurugram = 2018 (10) TMI 1868 - AUTHORITY FOR ADVANCE RULING, HARYANA.

[Kavali Ramanjeneyulu]

Sir, Development agreement dt is 8/2017 and first sale of flat was made in 3/2018 pertaining to Land Owner's share for ₹ 2800000/- ( 838 sq ft) . per sq ft rate is ₹ 3341/- . Total sq ft allotted to Land owner is 4190 sq ft and the total consideration for 4190 sq ft comes to ₹ 13998790/- . Wheras if we take actual sale deed value of all the 5 flats ( each measuring 838 sq ft ) sold in different months upt 9/2018, total consideration comes to ₹ 12050000/-. In this regard, please clarify whether value of first sale of flat nearer to Development agreement is to be adopted for the total area allotted to the Land owner or actual sale of values of the flats is to be taken for payment of tax. And also clarify when does the liability to pay tax arise for the Land owner in the above whether it is Development agreement date or actual sale deed date . Please clarification is requested on the above points.

[KASTURI SETHI]

Liability of developer arises only when completion certificate is obtained. See Notification No.6/19-CT(R) dated 29.3.19 (Clause D).

[Kavali Ramanjeneyulu]

Sir, this notfn is applicable wef 1/4/2019 whereas our transactions were prior to 1/4/2019. Please clarify sir. And on valuation whether first sale value is to be adopted for the entire area allotted to land owner or each individual flat sale deed value to be adopted. PL clarify sir.

[KASTURI SETHI]

Dear Querist,

Pl. read both notifications conjointly. Concept will be clear.

Special procedure for payment of CGST for construction under transfer of development rights

In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the following classes of registered persons, namely :-

(a) registered persons who supply development rights to a developer, builder, construction company or any other registered person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure; and

(b) registered persons who supply construction service of complex, building or civil structure to supplier of development rights against consideration, wholly or partly, in the form of transfer of development rights,

as the registered persons in whose case the liability to pay central tax on supply of the said services, on the consideration received in the form of construction service referred to in clause (a) above and in the form of development rights referred to in clause (b) above, shall arise at the time when the said developer, builder, construction company or any other registered person, as the case may be, transfers possession or the right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).

[Notification No. 4/2018-C.T. (Rate), dated 25-1-2018]

Construction under transfer of development rights - Amendment to Notification No. 4/2018-C.T. (Rate)

[Notification No. 23/2019-C.T. (Rate), dated 30-9-2019]

[Kavali Ramanjeneyulu]

Sir, please tell me about valuation as requested for in my previous queries

[KASTURI SETHI]

In my view, value of similar flats charged by the developer/promoter from the independent buyers nearest to the date of on which development rights are transferred to the promoter, is applicable.

AI Summary

GST Implications for Landowner's Share in Development Agreement: Developer's Responsibility, Valuation, and Exemptions Explained. A discussion on the Goods and Services Tax (GST) implications for a landowner's share in a development agreement with a developer. The developer is responsible for paying GST on the landowner's share, which can be collected from the landowner if agreed. The open market value of the service provided to the landowner should be used for GST calculations. Exemptions for flats sold after obtaining an Occupation Certificate (OC) do not apply to the landowner's share. The point of taxation is crucial, and the liability arises when the completion certificate is obtained. The valuation should be based on similar flats' value nearest to the development rights transfer date.