Taxtation on Joint Development Agreement

[SANJAY BAHETI]

Dear Professionals, Please clarify the taxation on joint development agreement for construction of apartments. Taxation in the hands of Land Holder as well as Building developer. Ex. If land owner give right to builder to construct the building. Land owner and builder share the building 50 each. Land owner get back the 50 of house against the land given.

 

[Rajesh Sharma]

Hi Sanjay,

As per the notification on this behalf there is a service tax liability on the value of flats constructed and transferred by the builder to the land owner. The value needs to be determined based on valuation rules. It can be cost of construction or Stamp Duty value as executed for the said constructed house.

[sanjeev bajaj]

Dear Rajesh Sharma

 

Pl provide notification no.

[Rajesh Sharma]

Kindly refer Circular No. 151 /2 /2012-ST.

AI Summary

Service tax applies to builder's transfer of flats to landowner in joint development; valuation based on construction costs or stamp duty. A query was raised regarding the taxation implications on a joint development agreement for constructing apartments, specifically concerning the tax responsibilities of both the landholder and the building developer. In this scenario, the landowner grants the builder rights to construct, and both parties share the completed building equally. A response highlighted that there is a service tax liability on the value of flats transferred by the builder to the landowner, which should be determined based on valuation rules such as construction costs or stamp duty value. A reference to Circular No. 151/2/2012-ST was provided for further guidance.