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 on transferred flats applies to builders under joint development agreements; valuation follows prescribed rules.
Service tax liability is imposed on the value of flats constructed and transferred by a builder to a landowner under a joint development arrangement; the obligation rests on the builder and the taxable value is to be determined under valuation rules, typically by reference to cost of construction or the stamp duty value of the constructed units, with administrative guidance in Circular No. 151/2/2012-ST.