TaxTMI 
TaxTMI 
2025 (6) TMI 577
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....ration borne by builder/developer? QUESTION 2 Is GST payable on monetary consideration payable to existing members in terms of development agreement for residential apartment projects, in following form, where development agreement is entered into on 02.09.2016 and amended subsequently by supplementary agreement on 01/12/2021 and 20/04/2024, respectively? - Rent for alternate accommodation - Brokerage for alternate accommodation - Shifting charges - Corpus to existing members - Corpus to society? QUESTION 3 What will be taxable value for levy of GST on area given free of cost to existing members (which will include following) in pursuance to development agreement, where development agreement is entered into on 02.09.2016 and amended subsequently by supplementary agreement on 01/12/2021 and 20/04/2024, respectively. - Area in lieu of existing area given - Additional area given - Amenities given - Parking area - Stamp duty & Registration borne by builder/developer. 01. FACTS AND CONTENTIONS - AS PER THE APPLICANT 1.1 We are a Private Limited Company engaged in the business of real estate Re-development of old buildings. 1.2 The company has been awarded a Re....
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....e, a Supplementary Agreement was entered in to on 01.12.2021 with the society following additional benefits to existing members as well as society against additional salable area as mentioned hereinabove. The details of revised benefits to members and society are as follows: TO MEMBERS Particulars As per DA Dt. 02.09.2016 As per 1st Suppl. DA Dt. 01.12.2021 Remarks Additional area free of cost over and above existing area 14% NIL No additional benefit Monthly Rent Rs. 30.00 per existing carpet sq.ft. with a rise of 10 % after every 12 months. Payable on 10th of every month. NIL No additional benefit Shifting Charges Rs. 25,000/- To and For (Rs. 12,500/- at the time of vacating old house and 12,500/-at the time of possession of new house) NIL No additional benefit Brokerage for alternate accommodation Equal to one month rent - payable at the time of vacating old house NIL No additional benefit Hardship Compensation/Corpus Rs. 500.00 per existing carpet sq.ft. payable as 50% on vacating old house and 50% on occupying new house NIL No additional benefit TO SOCIETY: - CORPUS Particulars As per DA Dt. 02.09.2016 As per 1st Suppl. DA Dt. 1.12.2021 R....
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....pl. Agr. 2. Rent up to 10.08.2024. 3. Shifting Charges of Rs. 12,500/ -. 4. 2nd and final instalment of corpus as agreed in DA To Society :- 1. A sum of Rs. 20.00 Lakhs as agreed in 1st Suppl. Agreement 2. A sum of Rs. 58,23,750/- as part payment against corpus of Rs. 3,000/- per additional saleble sq. ft. as agreed in 1st Suppl. Agreement. SUMMARY: * The DA was executed on 02.09.2016 * Members were offered Additional area, one four-wheeler parking slot, wo wheeler parking slot as per TMC rules, Monthly rent, Brokerage, Shifting Charges and Corpus payable to members. * Members were offered purchase of additional area @ Rs. 19,000/- per Carpet Sq. Ft. * The project commenced in March 2022. * 1st Supplementary Agreement was executed on 01.12.2021 wherein a corpus of 20.00 lakhs towards additional taxes (GST/VAT) and a corpus of 232.95 Lakhs for additional sale area was agreed to be paid to society. * 2nd Supplementary Agreement was executed on 02.04.2024 wherein an additional area of 40 Sq. Ft. appx was agreed to be given to each existing member free of cost over and above 14 % as agreed in DA. * On OC, rent upto OC, Shifting Charges, 2nd instalment of C....
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....gistration born by builder/ developer Ans- Occupation Certificate (O.C) of the re-developed building was issued on 01.12.2019. Therefore, the point of taxation is on 18.02.2019. Thus, GST is liable to be paid by the Noticee on the 'construction service' involved in the flats to be given to the existing flat owner. Further, the activities pertaining to the construction under redevelopment scheme for land owners and tenants is a supply of service as per schedule II Sr. No. 5 under section 7 of the CGST Act, 2017. Further the valuation of the said service activities is liable to be made as per the provision of section 15 of the CGST Act, 2017. This is also in view of Advance ruling, Authority for Advance Ruling under GST, Telangana [2021 (54) G.S.T.I, 472 (A.A.R .- GST-Telangana) [19.07.2021] in case of M/s. Vajra Infracorp India Pvt. Ltd and Notification no. 4/2018-Central Tax (Rate) dated 25th January 2018 the point of taxation in the instant case would be the date of handing over the completed flats or on transferring possession or the right in the constructed complex, building or civil structure/ to the person supplying the development rights by entering into a conveyance deed or....
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....n certificate of the building is to be considered for determination of value of flats allowed to the existing members in terms of Rule 27 of CGST Rule, 2017. In the instant case, the valuation of the supply of construction services of the flat given in lieu of transfer of development rights shall be equivalent to the value of the flat sold nearest to the date of completion certificate. Thus, the value of the service shall be arrived at the per Rule 27 of CGST Rule, 2017. Further, it is to inform that, a show cause notice SCN NO. 396/2021-22 dated 16.03.2022 was issued to the applicant on similar issue and was decided recently vide order-In-Original NO. 209VDS/AC/Div-VI/CGST/TH/2024-25 (centralized SCN NO. 1316/TH/2024-25) dated 03.02.2025. 04. HEARING Preliminary e-hearing in the matter held on 24.01.2025. Mr. Dnyanesh V. Retharekar, Advocate & others appeared and requested for admission of the application. Jurisdictional Officer Mr. Prakash, Deputy Commissioner of CGST is available. The application was admitted and called for final e-hearing on 13.03.2025. Mr. Dnyanesh V. Retharekar, Advocate & others Authorized Representative, appeared made oral and written submissions. Juri....
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....and amended subsequently by supplementary agreement on 01/12/2021 and 20/04/2024, respectively. - Rent for alternate accommodation - Brokerage for alternate accommodation - Shifting charges - Corpus to existing members - Corpus to society c) QUESTION C: What will be taxable value for the levy of Goods and Services Tax (GST) on the area provided free of cost to existing members which would include following) in pursuance of development agreement is entered into on 02.09.2016 and amended subsequently by supplementary agreement on 01/12/2021 and 20/04/2024. - Area in lieu of existing area given - Additional area given - amenities given OR - Parking Area - stamp duty and registration borne by builder / developer 5.2 The questions asked by the applicant are cogently summarized as below: a. Whether supply of free units inclusive of parking area and other amenities given to the existing members is liable for GST in a redevelopment project: undertaken by the applicant in pursuance to development agreements dated 02.09.2016, 01.12.2021 and 20.04.2024? and what would be value on which tax is leviable, if at all it is liable to tax? b. In lieu of development rights ....
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....o be allotted 24 flats and the developer was to have 11 flats for sale. (b) 1st Supplementary Agreement to DA dated 01.12.2021 The building was declared dilapidated by Thane Municipal Corporation. In the meantime, new Development Control rules as per UDCPR (Unified Development Control and Promotion Regulations) were introduced and the project became eligible for further FSI due to which the building plan was revised as Stilt + 7 upper floors with 7 flats on each floor (in place of 5 flats on each floor) i.e. total 49 Flats (In place of 35 flats as mentioned in earlier agreement) and hence after allotting 24 flats to existing 22 members, the Developer was left with 25 Flats for sale (In place of 11 Flats as mentioned in earlier agreement). Hence, a Supplementary Agreement was entered in to on 01.12.2021 with the society. (c) Commencement Of Project (March 2022) The actual construction started only in March 2022. The project was completed in July 2024. i) The Developer paid Shifting Charges of Rs. 12,500/- to each of the member, rent on 10th of every month starting from March 2022 till August 2024 to each of the member. ii) 1st Instalment of Corpus @ Rs. 200/- per Sq. ft.....
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....s opposed to the 11 flats originally agreed upon in the original agreement agreement dated on September 2, 2016. (g) Completion of Project The construction of project was completed in July 2024 and accordingly, Thane Municipal Corporation issued Occupation certificate on 12.08.2024. 5.3.2 The commencement of project was in March-2022 and the project was completed in July 2024. Thus, the construction services have been provided by the developer in respect of the entire project. In order to understand if these services provided in respect of free units given to the existing members of the society, amounts to supply under GST Act, provisions of supply u/s. 7 of the GST Act are reproduced as under: Section 7. Scope of supply - (1) For the purposes of this Act, the expression "supply" includes -- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or ....
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....authority, from any of the following, namely: - (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. In the present case, the Developer has entered into an Agreement to provide construction services in accordance with the terms set out in Clause 5 (b) of Schedule II. In ....
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....of development rights by the landowner to the developer is consideration received by such developer for supply of construction services. 5.3.5 Value of supply on which tax is leviable: In this context, reference is made to the provisions under paragraph 2A of the Notification No. 11/2017 CT(R) dated 28.06.2017. "2A. Where a person transfers development right or FSI (including additional FSI) to a promoter against consideration, wholly or partly, in the form of construction of apartments, the value of construction service in respect of such apartments shall be deemed to be equal to the Total Amount charged for similar apartments in the project from the independent buyers, other than the person transferring the development right or FSI (including additional FSI), nearest to the date on which such development right or FSI (including additional FSI) is transferred to the promoter, less the value of transfer of land, if any, as prescribed in paragraph 2 above." In view of this provision, the value of supply of the apartment in lieu of the development right is equivalent to sale of apartments sold by the developers to the independent buyers nearest to the date on which development ....
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....nt. In accordance with above mentioned para 2A and Rule 27 (a) of the Central Goods and Services Tax Rules, 2017, where the consideration is not wholly in money, the value of such flats shall be deemed to be equal to the value of similar flats supplied by the builder or developer to independent buyers for monetary consideration as mentioned above. Such construction services rendered by the developer to the landowner or society members, in exchange for development rights, constitute a supply of service within the meaning of clause 5 (b) of Schedule II of the Central Goods and Services Tax Act, 2017, and are accordingly liable to Goods and Services Tax (GST). 5.4 Now, coming to the second question whether GST is payable on various monetary payments made to the society members. 5.4.1 From the perusal of the three above mentioned agreements it is seen that after the first development agreement work could not commence due to change in DC Rules. 5.4.2 The developer has commenced construction of project in March 2022 i.e. after signing of the 1st supplementary agreement dated 01-12-2021. The key aspects concerning the construction to be undertaken was decided through this agreement. A....
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....n of flats to the developer was 11. Under the First Supplementary Agreement, the number of flats allocated to the developer was increased to 24. Furthermore, under the Second Supplementary Agreement, the number of flats allocated to the developer was further increased to 32. These changes represent a fundamental alteration to the original allotment terms and substantiate the fact that transfer of development rights have taken place in GST regime. Allotment of total carpet area and number of the flats between developer and the society, is essence of the executed agreement for transfer of development rights. Hence, the original Agreement dated 02.09.2016 cannot be classified as an executed agreement. Rather, it is more appropriate to state that the first Supplementary Agreement after which construction commenced governs the execution of transfer of development rights. 5.4.6 The Applicant relies on the terminology used, such as "Original Agreement," "Supplementary Agreement," and "Second Supplementary Agreement." However, the GST law recognize the mere usage of such terminology as determinative. The law explicitly refers to an "executed agreement," and it is evident that the Agreemen....
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....e part of the developer as he is paying these amounts. Thus, these amounts are in the form of consideration paid along with free units for acquiring development rights. The taxation of development rights after 01-04-2019 is governed by entry 41A of NN 12/2017 CT(R) dated 28/06/2017. The tax would be payable to the extent of unsold flats on the date of CC. It says 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 attributable to the residential apartments, which remain un-booked on the date of issuance of completion certificate, or first occupation of the project, whichever is earlier. It is further provided that tax payable shall not exceed 1% of the value in case of affordable residential apartments and 5% of the value in case of residential apartments other than affordable residential apartments remaining un-booked on the date of issuance of completion certificate or first occupation. The liability to pay central tax on the said portion of the development rights or FSI, or both, calculated as above, shall arise on the date of completion or first occupation of the project, as the case may ....