GST on Joint Venture

[Padmanathan KV]

ABC LLP which is holding 300 Cents of land is entering into a Joint Venture with XYZ LLP which is a developer for letting out commercial property. XYZ LLP shall build a commercial complex in the land belonging to ABC LLP and the registered JV will let out the building for rent charging 18% GST from tenant. The rent received by the registered LLP shall be shared between ABC LLP and XYZ LLP in 1:2 ratio. NB: Land will remain asset of ABC LLP and building will remain asset of XYZ LLP in books of accounts.

Whether 1/3 and 2/3 rent shared between ABC LLP and XYZ LLP liable to GST? If so, would reg JV entitled to claim ITC?

[KASTURI SETHI]

In my view, it is actionable claim and covered under Schedule-III of CGST Act. Just for further information: Claims for future rents and arrears of rent both are examples of actionable claims. Hence not liable to GST.

[Shilpi Jain]

In this regard you will have to examine whether the amendment to the provisions of GST act for getting away from the mutuality concept in the case of societies, also affects the transactions between the JV partners or the JV and the partners.

in case the answer to this is yes then this will be liable. Also the contracts in this case will play a big role to ascertain the The taxability of this transaction

[KASTURI SETHI]

In order to arrive at correct and concrete decision, the querist can take a cue from the following decision of AAR, Tamilnadu

2019 (7) TMI 1000 - AUTHORITY FOR ADVANCE RULING, TAMILNADU IN RE : VENKATASAMY JAGANNATHAN

There is not even an iota of doubt that terms and conditions of the agreement in this scenario plays a vital role.

AI Summary

GST on joint venture rentals: taxability hinges on contractual structure and whether rent shares are actionable claims. Issue: Whether rent received by a registered JV that lets out a commercial building, and the subsequent sharing of that rent between the landowner and developer partners, is subject to GST and whether the JV may claim input tax credit. One view treats future rent entitlements as actionable claims under Schedule III and not taxable; an alternative view stresses that amendments removing mutuality concepts and the specific contractual terms between JV and partners determine taxability and ITC eligibility, with prior administrative rulings seen as instructive.