GST on sale of land in exchange of apartments

[Narayan Pujar]

Hi,

In a JDA, a landowner transfers the development rights to developer in exchange of newly constructed apartments. GST law provides for taxability in such cases.

However, the other day I heard of an agreement wherein the landowner has sold the land through a sale deed in exchange of apartments/shops. In this, since one leg involves direct land transfer, it would not be liable to GST as per Schedule III.

My question is: Since direct land transfers are exempt under GST, why do people prefer Joint Development Agreements (JDAs) over outright land sales, even though development rights in a JDA attract GST? Additionally, the second leg of the transaction remains the same in both cases.

Could this preference be due to implications under other laws? If yes, then what would they be?

AI Summary

Exploring GST Implications: Why Joint Development Agreements Are Often Chosen Over Direct Land Sales Under Section 7(1A) In a discussion about Goods and Services Tax (GST) implications on land sales and Joint Development Agreements (JDAs), a participant questions why JDAs are preferred over outright land sales, given that direct land transfers are exempt from GST. Responses suggest that outright sales do not involve GST on development rights, but JDAs might be chosen for other benefits, such as future considerations. Additionally, the choice could depend on whether the land rights are leasehold or freehold. Historical legal uncertainties and potential future clarifications, such as the Supreme Court's stance, also influence these decisions.