GST POT on Area sharing against Agreement for Sale

[Kalpesh Shah]

Respected Experts,

I have Querry as follows :

Facts of the case :

One of My client is a Developer. He has entered into an Agreement for Sale for Land alongwith FSI against consideration payable in the form of Constructed Units to be given to Landowners.

This Agreement for Sale will be converted into Conveyance Deed by paying 2% stamp duty in the future after transaction gets over.  

Querry :

1. What will be point of Taxation for units of Landowners ? At the time of OC or at the time of Executing Agreement for Sale ?

2. Whether GST RCM applicable on Unbooked Residential units at the time Receipt of OC ?

Thank you in Advance 

[Sadanand Bulbule]

GST on landowners flats is due at the stage of obtaining Completion/First Occupancy Certificate unless sold earlier. Unsold units at  the stage of CC/OC attract RCM by the developer/promoter within 30 days. Refer Section 13  of the CGST Act for time of supply of services with relevant notifications.

[Kalpesh Shah]

Sir,

Thank you for your reply. 

Agreement entered is Agreement for Sale. 

Sale gets completed after terms & conditions in the Agreement is fulfilled.

Is this Agreement is considered as a Joint Development Agreement or a Conveyance Deed ?

[Shilpi Jain]

Units handed over to LO will be liable to GST and value will be as per rule 27 i..e open market value. If this cannot be identified you can consider cost + 10%. 

If there is no JDA, may not be development rights.

However one catch in this would be that the builder is constructing all the units for the LO. Out of those constructed units, a part is given back to developer as consideration.

So if there are 100 units int he project, builder will have to pay GST on entire 100 units and cannot afford to only pay GST on the 40 units (for example) that may be handed over to LO.

Terms of agreement and other aspects would be very important to look in this regard.

The above is only a prima view based on understanding of facts.

AI Summary

GST on landowner units: tax arises at completion/occupancy and unsold units attract reverse charge on occupancy.
GST on units allotted to landowners is triggered at Completion/First Occupancy Certificate unless transferred earlier, with unsold units attracting the reverse charge mechanism within thirty days; valuation should follow open market value or cost-plus where market value is indeterminate. Characterisation of the agreement (agreement for sale versus joint development) and the precise contractual terms determine whether consideration is treated as transfer of land, supply of service, or allotment of constructed units and thereby allocate GST liability.