GST ON JDA IN CASE OF PLOTTING RESIDENTIAL PROJECTS

[ROHIT GOEL]

Dear Sir,

Company A and Company B both own 2 acres land. Now Company A is signing JDA with Company B as per which Company B will carry out plotted development on entire 4 acres land and sell residential plots. My questions are as follows:

1. Is TDR granted for plotted development exempt since ultimate sale of developed plots to customer is exempt?

2. If not,are there 2 separate taxable supplies in this case i.e. one being granting TDR by landowner to promoter and second being development services provided by promoter to landowner. Or only one i.e. grant of TDR?

3. If yes, what is respective tax rates on both type of services?

4. Would the tax liabilities be different if it is a revenue sharing or a area sharing arrangement?

5. I understand that tax is to be paid in case of area sharing arrangement only at time of completion of project. What would be position in case of revenue sharing arrangement i.e. say the developer would be liable to transfer 20% of entire project sale to the landowner instead of giving developed plots?

[Shilpi Jain]

The queries that you have need proper examination and analysis. Suggest that you approach a professional for advice rather than seeking it in this forum. Though summary answers below:

a. No

b. 2

c. 18%

d. analysis required as interpretative issue involved

e. analysis required considering the provisions of Notification 6/2019-CTR

[ROHIT GOEL]

Dear Mam,

In case the parties into a revenue sharing agreement, say 20% of lifetime sale proceeds of project will be received by landowner. In such a case:

1. Whether any tax is to be paid on Construction service or not? Because in this case, the landowner will not be receiving any developed plots back.

2. What will be the value of the TDR in this case? Whether it will be developer's share of total project sale i.e. say 80%?

Looking forward to your reply.

[Shilpi Jain]

If revenue share agreement then no development service provided by Developer.

Development rights is given to the developer to the extent of his share of units.

AI Summary

GST on transfer of development rights: two taxable supplies identified, tax treatment differs by area versus revenue sharing arrangements. GST on plotted residential JDA raises whether grant of transfer of development rights (TDR) is exempt and whether there are two taxable supplies: grant of TDR by landowner and development services by promoter. Advisory responses in the document state TDR is not exempt, identify two supplies, indicate the development service attracts a taxable rate as advised, and note area versus revenue sharing arrangements raise different tax positions. Under revenue sharing, the adviser notes no development service to the landowner because the developer receives development rights to the extent of its share of units, creating valuation and notification issues requiring professional analysis.