Joint Development Agreement for land

[VENU K]

An unregistered partnership firm entered into a land development agreement with another unregistered individual landowner. The consideration as per the development agreement for the two acre plot as per the registered agreement is 54 percent for land owner and 46 percent for developer. A refundable deposit of Rs.40,00,000/- was paid at the time of signing of the agreement. This is a fully refundable deposit. Only the preliminary works have been started now. There is absolutely no plans for construction of units in the plot. The agreement is to just develop the plots and sell it. No plot sale has as yet happned. The agreement was registered on 15 Feb 2024.

The doubts here are

1. Is the partnership firm liable for registration as of today, assuming there are no other turnover. The developer firm has not made any supplies so far.

2. Can a liability be imposed on the firm under Reverse Charge for transfer of development rights as the firm is an unregistered firm.

3. If there is an RCM liability , then, what is the time of supply ?

The Managing Partner is being summoned by the Department now.

AI Summary

Reverse charge on transfer of development rights may apply, with time of supply typically near project completion.
A joint development agreement to develop and sell plots raises GST questions: an unregistered developer will generally need registration when the taxable project nears completion though may register earlier to claim credits; transfer of development rights and related development services can attract reverse charge irrespective of the transferor's registration; time of supply for RCM is interpretative but is commonly viewed as near project completion or at handing over possession; valuation for RCM typically reflects the developer's proportionate share of fair market value of land rights, while sale of land remains non-taxable though development services remain taxable.