GST on TDR under RCM payable by the Developer/Promoter in Real estate business

[KALLESHAMURTHY MURTHY K.N.]

What is the difference between Transferable Development Rights and Transfer of Development Rights, and GST implications under RCM?

 

[PRIYACHARAN SR]

Hi,

TDR and ToDR are both independent supplies and are taxed differently

In TDR (Transferable Development Rights), Government (local authority) gives an instrument to land owner (for surrender of his right) to either use it or sale it.

Taxability: - it is clear that TDR is a benefit arising out of land and transfer of TDR gives the recipient an irrevocable and permanent development rights on such land. TDR may be covered under ‘sale of land’ in Entry No. 5 of schedule III of the CGST Act. Therefore, TDR is neither ‘supply of goods’ nor ‘supply of services

In Transfer of Development Rights, the owner of land allows promoter to develop the land on behalf of the landowner against a consideration.
Taxability: - transfer of ‘Development Rights’ being a ‘Construction Service’ under Heading 9972 is taxable as a supply of service under the GST Act, 2017. 

• Notification 13/2017 – Central Tax (Rate), Entry 5B: Transfer of development rights by landowner to promoter is taxable under Reverse Charge Mechanism (RCM).

• Rate: Generally 18% GST on the value of development rights.

• Liability:

  • Promoter/Developer pays GST under RCM.

  • Landowner is not liable directly.

  • Notification 4/2019 – Central Tax (Rate), Entry 41A: Exemption for transfer of development rights used for construction of residential apartments, subject to proportional calculation (based on carpet area of residential vs. commercial). Provided that the promoter shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of development rights, or FSI (including additional FSI), or both, as is attributable to the residential apartments, which remain un booked on the date of issuance of completion certificate, or first occupation of the project,

  • GST applies only to the portion attributable to commercial units in a mixed project

Disclaimer : The views and opinions expressed on this website are for general informational and educational purposes only. They do not constitute professional advice, legal opinion, or a substitute for consultation with qualified advisors.

[Sadanand Bulbule]

While welcoming the views of the expert, it may be summarised as under:

When the Government gives TDR to a landowner, it is treated just like giving extra land rights, so it is not taxed under GST at all. But when a landowner gives development rights to a builder (ToDR) so the builder can construct on the land in return for flats or money, it is treated as a service and GST must be paid by the builder under the reverse charge rules.

There is also a special exemption for housing projects: GST is not charged on development rights used for residential flats that are sold before completion, and it applies only to commercial parts or unsold residential flats at the time the project is completed.

In simple terms, government-issued TDR is not taxed, but development rights given by a landowner to a builder are taxed differently and only in specific situations.

[KALLESHAMURTHY MURTHY K.N.]

Thanks for the replies from Sri Priyacharan SR and Sri Bulbule Sir.

Further, that the Transferable Development rights received from the Government Authority are given by a landlord to a builder either on sale or for sharing in flat construction, whether the Promoter is liable to tax payable under RCM

 

[Sadanand Bulbule]

Transferable Development Rights (TDR) issued by Government and Transfer of Development Rights (ToDR) under a JDA arise from different situations. However, when a promoter receives either of them for a project, GST under RCM is generally attracted.

The earlier Bombay High Court relief for JDA-based rights is no longer effective. The Supreme Court [2025 (11) TMI 71] has stayed that adjudication order, so RCM liability continues on both TDR and ToDR until final verdict.

[KALLESHAMURTHY MURTHY K.N.]

Thank you, Sir, for the clarification enlightened by the Supreme Court Verdict.

[Sadanand Bulbule]

2025 (11) TMI 1627 - AUTHORITY FOR ADVANCE RULING, KERALA ON JDA & TDR. - In Re: M/s. SI Property Kerala Private Limited

[Shilpi Jain]

Do have a look at the decision of Shrinivasa Realcon Pvt. Ltd. – 2025 (4) TMI 931 - BOMBAY HIGH COURT which has held that no GST under RCM on TDR.

Transferable development rights are certificates which will provide additional built up area in your constructions subject to terms and conditions.

transfer of development rights happens through joint development agreement which will be related to a specific land which is the subject of the JDA.

 

[KALLESHAMURTHY MURTHY K.N.]

Thank you, Madam, for the more information.

AI Summary

GST on TDR vs ToDR: land benefit under Schedule III versus construction service under Heading 9972, litigation continues Participants discuss GST treatment of Transferable Development Rights (TDR) versus Transfer of Development Rights (ToDR) in real estate. TDR issued by a government authority is characterized as a benefit arising from land and arguably falls under 'sale of land' (Schedule III), thus outside GST when viewed in isolation. ToDR, typically under a joint development agreement where a landowner grants development rights to a promoter for consideration, is treated as a construction service (Heading 9972) and liable to GST under reverse charge, payable by the promoter. Notifications on RCM and exemptions for residential projects (with proportional levy on unsold/ commercial area) are cited. Conflicting rulings, including a Bombay High Court decision and a later Supreme Court stay, indicate continuing litigation and uncertainty.