• Applicability of GST on JDA

Dear Sir,
I am a Land owner and want to enter into a Joint development agreement (JDA), on Area sharing basis(50%), with a Builder. After one year i shall be getting my share of 4 apartments, our of total 8 apartments.
1. Is any GST applicable on JDA? Is it to be paid by Landowner or Builder ? How is it calculated?
2. Is any GST applicable when i receive the flats, with a completion certificate? If yes, is it to be paid by me( Land owner) or Builder? How is it calculated?
3. Is any GST to be paid, when i receive the completion certificate, and later i sell the flat to a buyer? If yes, is it to be paid by me (Land owner) or the Buyer ? How is it calculated?
4. is any Capital gains tax to be paid by me when i i receive the flats, with a completion certificate? How is it calculated?
5. Is any Capital gains tax to be paid by me , when i receive the completion certificate, and later i sell the flat to a buyer? How is it calculated?
Asked 5 years ago in GST

Dear Sir,

 

Hope you are doing well !!

 

When a developer enters into a development agreement with a Landowner, GST would become payable by the Landowner when the developer transfers possession or the rights in the constructed complex, building or civil structure, to the Landowner by entering into a conveyance deed or allotment letter.

 

Hence, when the Landowner receives a constructed property from the Developer in exchange for providing land, the Landowner would become liable for payment of GST. The GST rate applicable on such a transaction would be 18%.

 

The actual GST rate for under construction flats, properties or commercial properties is 18%. However, 1/3 of 18% is deemed as the value of land or undivided share of land supplied to the buyer of the property. So effectively rate will be 12% with full ITC.

 

It should be calculated on fair market value of land.

 

Also, Supply of Construction Services by the Developer to Landowner (supplier of Development Rights) is a Supply for a consideration in the form of Transfer of Development Rights and therefore GST is payable by the Developer when he transfers possession of flats to the Landowner.

 

So, land owner as well as developer both are liable for GST.

 

Sale of Building after receipt of Completion Certificate is treated as neither goods nor service, that means not considered as supply and therefore GST is not applicable.

 

If you need any further assistance, please let me know.

 

Thanks & Regards,

Payal Chhajed

 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

1. Yes GST is applicable. Since you are getting flat prior to completion of construction. It will be calculated on sale  value of other flat.

2. GST will be charged by builder to you & deposited to government. It is builder's responsibility to assess liability  & collect from you. In case if he forgets to collect from you, he will have to make payment when demand arises from his pocket. So you need not worry.

3. No.

4. Capital Gains tax would be calculated by considering -

Selling price = value of land (50%) which you will hand over to builder.(Valuation needs to be done)

Cost = Cost of 50% of land. 

Benefit of Indexation is allowed.

Further you can claim deduction by showing that capital gain has been invested by purchase of other apartment.(which you will receive).

 

5. If you sell apartment within 3 years then deduction claimed will have to be reversed.

On Sale of Apartment separate Capital gain is applicable.

 

Kindly get the exact calculation Done by a Practicing CA to obtain maximum benefit of deductions available & for doing proper tax planning.

 

Chirag Maru
CA, Raipur
210 Answers

5.0 on 5.0

Yes GST is applicable on JDA since the consideration is flowing to builder before the construction is complete so GST would be paid at 12% of the value of construction.

GST is paid by land owner but collected by builder on behalf of government.

No GST will be applicable when you sell the flat after getting completion certificate.

Yes you need to pay capital gain tax when you receive flats since you are receiving flats for giving your share of land and capital gain would be FMV of flats received less value of land given in exchange.

Yes you need to pay capital gain tax when you sell such flats.

Sir please don't confuse yourself you are only giving 50% of land to the builder. On paper it is 100% but when he would transfer 4 flats to you which is half of 8 flats he is also giving back 50% of share in land so technically you again got back your 50% land so in the end you transferred 50% of your land and in return you received constructed flats on your part of land.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Hi,

 

1.Yes, GST is applicable on JDA. It has to be paid by both for respective services.

 

2. It is  builder responsibility to collect the GST from land owner on behalf of government.

 

3. No.

 

4. Yes, you will be liable for capital gain tax. It should be calculated on fair market value of flats received minus value of land given in exchange.

 

5.Yes, it will be calculated by deducting value of the flat from actual sale consideration.

 

 

 

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Hi,

- In case of JDA, GST is applicable on both landowner and builder. For builder it is works contract service which is supply under the GST and he would charge GST@18% on the construction cost from the landowner.

- Landowner is also required to be registered under GST and liable to pay GST@18% of 2/3rd value of the flats received by him from the builder. The effective rate would be 12%. Value of land is 1/3rd of the total value. If the total value is Rs.100 then value of land would be Rs 33.33 even though actual value of land is Rs.50.

- The area of concern is the calculation of the value on which the landowner needs to pay GST, for which valuation rules needs to be considered.

- No GST is to be collected by you after receiving the completion certificate.

 

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1031 Consultations

5.0 on 5.0

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