GST under RCM on Development Rights

[hubert fernandes]

GST ON DEVELOPMENT CHARGES

We are presently executing a project, of which we have received development rights from the land owner (Housing Society).

The Builder developer in said project constructing residential & commercial apartments, however commercial area does not exceed 15% of total carpet area of the project & hence project qualifies as RREP.

In lieu of Development Rights Builder Developers will allot certain numbers of Residential Apartments to the Land Owners (Housing society)

what will be Builders Developers liability on account of GST under RCM on transfer of Development rights vis a vis Notification 04/2019 – Central Tax (Rate) dt.29.03.2019.

[Shilpi Jain]

For the share of area which the developer gets, he will have to pay gst under rcm by adopting the first sale value near the jda... This liabilty will arise in completion

[hubert fernandes]

Does Commercial Area also Eligible for exemption if project qualifies as RREP

[Shilpi Jain]

The exemption for development rights will be eligible only w.r.t. the residential units and not for the commercial units in the RREP since the exmeption notificaiton is clear that it is only for the residential units.

[hubert fernandes]

Does GST paid under RCM againts Development rights on commercial area qualifies for Input Tax Credit ?

[hubert fernandes]

Madame ,Agreed , that the exemption with regard to Development rights under RCM is only eligible in respect of the residential units and not for the commercial units in the RREP. But please refer to explanation 1B of the said notification and the same is contradictory, .The said explanation 1B is reproduced herein below

Explanation 1B to principal Notification No. 12/2017- Central Tax (Rate) dated 28.06.17

"Value of portion of residential or commercial apartments remaining un-booked on the date of issuance of completion certificate or first occupation, as the case may be, shall be deemed to be equal to the value of similar apartments charged by the promoter nearest to the date of issuance of completion certificate or first occupation, as the case may be."

[Shilpi Jain]

ITC will be eligible for the tax paid on development rights to the extent of the area sold before Completion

[Shilpi Jain]

Merely because the valuation mechanism provides for the value of calculating, it would not automatically mean exemption is applicable.

The exemption flows basically from the exemption entry only. When the entry itself does not provide for the exemption, support from the explanations in the notification cannot be taken.

Hence no exemption for commercial units DR.

[deepak gulati]

Shilpi Mam

In point 6 above you have mentioned that Input of GST paid under RCM by builder will be available to him, if flats are sold before completion.

Since the rate is 5%, input should not be available.

Please clarify

thanks.

AI Summary

GST reverse charge on development rights: residential units in qualifying projects may be exempt, commercial development rights remain taxable.
GST under the Reverse Charge Mechanism applies to development rights allotted to land owners; the developer must discharge tax on the allotted share by adopting the first-sale value near the joint development arrangement, with liability arising on completion or first occupation. The notification's valuation explanation (1B) determines values for unbooked units but does not create exemptions. Exemption for development rights is limited to residential units in qualifying residential projects; commercial units remain taxable. Input tax credit on GST paid under RCM is available only to the extent flats are sold prior to completion.