Value on commercial building developed on sharing basis

[Narasimha MurthyR]

A developer constructed a commercial complex on development basis with the landowner with share of 50:50. But both the developer and landowner are not selling the constructed complex. After completion of the building, both the developer and landowner are leasing their share of building. In such a scenario, on what value the GST is required to be paid as there is no intention to sale the developed property in the instant case. It is clear that the rate of GST on commercial construction is 18% in terms of the Notification No.11/2017-Central Tax (Rate) as amended. Teh experts may please through light on this issue Thanks in advance.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir, 

1. The developer has provided construction service to the Land Owner. Hence, attracts GST on land owner. The developer has received TDR, on which tax is liable to be paid.

2. Renting of commercial property is considered as a supply of service under the GST Act and is taxable @18%. In case the tenant is an unregistered person, the supplier of service has to pay tax under RCM. 

This is for educational purposes, not a legal opinion. 

[Shilpi Jain]

Cost + 10%

[Narasimha MurthyR]

Thank you for your response Murthy ji and Shipi ji.

I could not find the authority for valuation of the commercial construction constructed on sharing basis by the landowner and developer and both of them are not selling any part of the construction. 

All the scenarios given in the Notification No.11/2017-CT(R) are not applicable to his case. Further Sl. No.5(b) of the Schedule-II excludes the construction in which there is no intention to sell.

Can you please provide the authority for the valuation in the above case.

AI Summary

Value of construction services for GST when developer and landowner share and lease property: taxability and valuation guidance sought. GST liability arises where a developer constructs a commercial complex on a 50:50 sharing arrangement and both parties lease, not sell. The construction is a construction service by the developer to the landowner, making any consideration including transferable development rights taxable. Leasing commercial property is a taxable supply of service at the prescribed rate, and where the tenant is unregistered the supplier may be liable under the reverse charge mechanism. The author notes the rate notification and Schedule II exclusion do not clearly address valuation in this scenario and seeks authoritative guidance.