TaxTMI 
TaxTMI 
2025 (6) TMI 577
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.... - Amenities given - Parking area - Stamp duty & Registration 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 T....
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.... flats as mentioned hereinabove) and hence after allotting 24 flats to existing 22 members, the Developers were left with 25 Flats for sale (In place of 11 Flats as mentioned hereinabove). Hence, 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/Corp....
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....on 12.08.2024. 1.19 On completion of project and after receiving Occupation Certificate, the Developer made following payments to members and society. To Members: - 1. Physical Possession of units with 14 % additional free area as agreed in DA and additional appx. 40 Sq. Ft. area free of cost in the form of a balcony as agreed in 2nd Suppl. 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 Suppleme....
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.... - C Not applicable in view negative answer to question A 03. CONTENTION - AS PER THE CONCERNED OFFICER: 3.1 Question. A: is GST payable ON AREA GIVEN FREE OF COST (which will included following) to existing members 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 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....
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....ement, where development agreement is entered into on 02.09.2016 and amended subsequently by supplementary agreement of 01.12.2021 and 20.04.2024, respectively. - Area in lieu of existing area given - Additional rea given - Amenities given-Parking area - Stamp duty & Registration borne by builder/ developer Ans. The value of the taxable services would be equivalent to the gross amount charged by the Taxpayer to the buyers of the flats sold in open market to new buyers against the monetary consideration per the existing rates per square feet. The value of similar flats sold near to the date of completion 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 da....
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....STION A:- Is GST payable ON AREA GIVEN FREE OF COST (which will include following) to existing members in pursuance to development agreement, where development agreement is entered into on 02.09.2016 and amended subsequently by supplementary agreement on 01/12/2021and 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 b) Question - B 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 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 ....
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....ith a rise after end of each calendar year of 10 % to last rent. (To be paid every month during the construction period) to the existing members of the society. iv) To & Fro shifting charges for the alternate accommodation v) Brokerage equal to one month rent required to be paid to the agent for finding alternate accommodation. vi) Hardship compensation/Corpus payable 50 % while vacating the existing house and balance 50 % on occupying new house. vii) Option to purchase additional area at an agreed rate. viii) Out of Developer's share of sale, applicant sold 1704 Sq. Ft. to existing members for a rate of Rs. 19,000/- per Sq. Ft. of carpet area. ix) After allotting area to existing members, the applicant is left with an area of 4,893 Sq. Ft. for sale in open market. x) The building was planned as Stilt + 7 upper Floors with 5 Flats on each floor i.e. 35 Flats total out of which 22 existing members were to 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....
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....nt vii) A sum of Rs. 58,23,750/- as part payment against corpus of Rs. 3,000/- per additional saleable sq. ft. area as agreed in 1st Suppl. Agreement. (f) Summary of three Agreements :- i) Members were offered Additional area, one four-wheeler parking slot, two wheeler parking slot as per TMC rules, Monthly rent, Brokerage, Shifting Charges and Corpus payable to members. ii) Members were offered purchase of additional area @ Rs. 19,000/- per Carpet Sq. Ft. iii) The project commenced in March 2022. iv) 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. v) The Second Supplementary Agreement was executed on April 2, 2024, pursuant to which an additional area of 40 square feet of carpet area in the form of a balcony was allotted free of cost to each of the 24 flats owned by 22 members. vi) Pursuant to the execution of the agreement dated April 2, 2024, the developer became entitled to a total of 32 flats, as opposed to the 11 flats originally agreed upon in t....
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....rn he has supplied a constructed flats free of cost along with other benefits. Consequently, this transaction squarely falls under "exchange" as mentioned in Section 7 (1) (a) of MGST Act and thus within the purview of Scope of Supply under MGST Act, 2017. 5.3.3 Section 7 (1A) provides that schedule II shall list activities that are to be treated as supply of goods or supply of services. The relevant Sr. No.5 of Annexure II is reproduced as under: 5. Supply of services. - The following shall be treated as supply of service, namely: - (a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. Explanation. -- For the purposes of this clause -- (1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case ....
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....e for the TDR/FSI provided by the society. This is treated as a exchange/barter transaction under GST, and both sides of the transaction are taxable. Here's how it works: 1. Taxability of Free Units: • The supply of residential units to society members is considered a supply of construction services under Section 7 of the CGST Act, as it involves the construction of a building for the society in exchange for TDR/FSI." • As per Notification No. 03/2019-CT(R), the developer is liable to pay GST on this supply at the effective rate of 1% (for affordable housing) or 5% (for non-affordable housing) without Input Tax Credit (ITC) for projects commencing on or after April 1, 2019. • The value of this supply is determined as per the open market value of similar apartments sold to independent buyers nearest to the date of the development agreement, as per Notification No. 04/2019-CT(R). Valuation: • Since no monetary consideration is involved, the value of the construction service (free units) is deemed to be equal to the price charged for similar units sold to independent buyers. • GST is payable at the time....
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....he form of upfront amount (called as premium, salami, cost, price, development charges or by any other name), as the registered persons who shall pay central tax on, - (a) the consideration paid by him in the form of construction service of commercial or residential apartments in the project, for supply of development rights or FSI (including additional FSI); (b) the monetary consideration paid by him, for supply of development rights or FSI (including additional FSI) relatable to construction of residential apartments in project; (c) the upfront amount (called as premium, salami, cost, price, development charges or by any other name) paid by him for long term lease of land relatable to construction of residential apartments in the project; and (d) the supply of construction service by him against consideration in the form of development rights or FSI (including additional FSI), - in a tax period not later than the tax period in which the date of issuance of the completion certificate for the project, where required, by the competent authority, or the date of its first occupation, whichever is earlier, falls. In cases where flats are ....
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....eement consists of definitive terms. c. Completion of Obligations: The obligations stipulated under the agreement must have been duly performed or legally enforceable at the time of execution. Completion of Obligation of the said case is of second supplementary agreement. d. Finality of Rights and Liabilities: The rights, obligations, and liabilities of the parties must be conclusively determined and enforceable without the necessity of any further agreement or supplementary arrangement. In the absence of fulfillment of the aforementioned conditions, agreement dated 02.09.2016 cannot be categorized as an executed agreement in the legal sense as it did not fulfill all contractual obligations and conditions. 5.4.4 The amendments introduced to the Agreement dated 02.09.2016, the First Supplementary Agreement dated 01.12.2021, and the Second Supplementary Agreement dated 20.04.2024, have materially altered the terms and conditions of the initial agreement. The project was completed in July 2024, in accordance with the revised terms and conditions stipulated in the aforementioned supplementary agreements. Hence it would not be legally correct to consider that the....
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....y Notification No. 03/2019-Central Tax (Rate), dated 29-3-2019. The Notification No. 03/2019-Central Tax (Rate), dated 29-3-2019 substituted the rate for services related to real estate sector with effect from 1-4-2019 and also made provisions for continuing the old rate of tax (as it existed up to 31-3-2019) for the ongoing projects. Notification No. 04/2019 -Central Tax (Rate), dated 29-3-2019 provided that the promoter shall be liable to pay tax at applicable on reverse charge basis. 5.4.8 As per notification No. 4/2019 the liability to pay tax in respect of development rights for construction of residential arises under reverse charge mechanism in the hands of developer. As per entry 41A introduced in Notification No. 12/2017 CT(R) dated 28/06/2017, the liability will be to the extent of unsold flats on the date of completion certificate. The applicant has provided construction services to the existing members. Thus, it can be said that in lieu of the development rights received from the society, developer has provided the following. i. Free unit/ flats ii. Rent for alternate accommodation. iii. Brokerage for alternate accommodation. iv. C....