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

Valuation of development rights: deemed apartment price less land component determines GSTable value on construction services.
Valuation for construction services in exchange for transferred development rights is deemed equal to the promoter's price for similar apartments sold to independent buyers, less the value of land; the applicable rate notification permits deduction of a prescribed land component and GST is payable on the residual value, with promoters potentially liable under reverse charge for the proportion attributable to unbooked apartments at completion or first occupation.