GST rate for land owner after completion of residential apartments

[Raam Srinivasan Swaminathan Kalpathi]

JDA signed in Feb 2023

Project completed in July 2026

Residential apartments

Builder has charged landlord 3.75% CGST and 3.75% SGST are abating 1/3rd of land owner transfer value.

Is the % applied correct? Request experts to confirm. Thanks

[Sadanand Bulbule]

Refer Discussion Issue ID : 121017

 

[Sadanand Bulbule]

2026 (4) TMI 1653 - KARNATAKA HIGH COURT - The State of Karnataka, The Additional Commissioner of Commercial Taxes (Zone) -1, Department of Commercial Taxes, Government of Karnataka, The ...More

[KALLESHAMURTHY MURTHY K.N.]

Sir,

According to Notification No. 3/2019-Central Tax (Rate), when a developer provides construction services to a landowner in exchange for development rights (JDA), the value of the supply is deemed equal to the value of similar apartments sold to independent buyers.

The effective rate of tax is applicable at 5%, where the land cost includes; otherwise, it is 7.5% after abating the land cost.

Crucially, the 1/3rd land deduction must be subtracted from this value before calculating tax. Because the transaction inherently includes the transfer of an undivided share of land back to the landowner as part of the apartment, the land component remains fully exempt from GST under Schedule III of the CGST Act.

However, cost-effectiveness depends upon the terms and conditions of the mutual agreement between the land owner and the developer.

In the present case, the builder is correct because he is responsible for the tax payment on both the landowner's share and the developer's share.

[KASTURI SETHI]

Dear Sir,

No room left for any doubt in your reply.

 

 

[KALLESHAMURTHY MURTHY K.N.]

 

Kasturi Sethi Ji,

Thank you very much Sir.

[Shilpi Jain]

If the value adopted to charge GST includes land value (or value of undivided share of land) then charging 3.75% + 3.75% with 1/3rd deduction is correct.

AI Summary

Joint development apartment valuation applies land abatement where the adopted value includes the landowner's undivided land share.
GST on residential apartments allotted to a landowner under a joint development agreement is discussed by reference to valuation based on similar apartments sold to independent buyers. Where the adopted value includes land or an undivided share of land, tax may be charged at 3.75% CGST and 3.75% SGST after a one-third land deduction. The land component is treated as outside GST under Schedule III, while the developer's tax responsibility for the respective shares depends on the agreement terms.