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.

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.