GST On Flats Given To Society Members Under Development Agreement.

[Pradeep Singhi]

Sir,
Developer enters into development agreement (DA) with society members/tenants. In lieu of FSI,Development Rights few constructed flats are given to existing tenants/society members and few flats are sold to independent buyers. Land continues to belong to society.

Explanation 2A to rate notification 11/2017 states,

'2A. Where a 110[*] person transfers development right or FSI (including additional FSI) to a promoter against consideration, wholly or partly, in the form of construction of apartments, the value of construction service in respect of such apartments shall be deemed to be equal to the *Total Amount charged for similar apartments in the project from the independent buyers*, other than the person transferring the development right or FSI (including additional FSI), nearest to the date on which such development right or FSI (including additional FSI) is transferred to the promoter, less the value of transfer of land, if any, as prescribed in paragraph 2 above.]'

--> Units sold to independent buyers includes value of land, same value cannot be made applicable to units given by builder to land-owner/society as land continues to be under the ownership of society/landowner.

Question 1) How to determine the taxable value of units given by builder to society-members/Landowner in lieu of FSI/Developement Rights when land belongs to society/landowner?

AI Summary

Taxation of Units Given to Society Members Excludes Land Value; GST Based on Construction Value Only A developer enters into a development agreement with a society, giving constructed flats to existing tenants in exchange for development rights, while selling other flats to independent buyers. The land remains owned by the society. The issue discussed is how to determine the taxable value of units given to society members when the land is not transferred. Responses suggest that the taxable value should exclude the land value, as the land remains with the society. The GST should be calculated based on the construction value, with deductions for the land component, as the society members do not pay monetary consideration to the developer.