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Earlier, At the point when a developer comes into contract with the landowner using Joint Development Agreement (JDA), GST will be payable by the owner of the land at the time when the developer transfers back the rights or possession to the landowner by signing an allotment letter/conveyance deed.
Let us understand this with an example
If the landowner gives his land to the developer and after a while in return gets a constructed property, then in such a case the landowner will be liable to pay GST. And, the GST rate on such transfer is 18%.
After notification, GST is no longer payable on transfer of development rights/FSI/additional FSI provided, all of the following conditions are met:
- Transfer takes place on or after 1st April 2019;
- Development rights are transferred for construction of residential apartments by a promoter in a project (both terms as defined under RERA), intended for sale to a buyer, wholly or partly; and
- Consideration or part thereof for the residential apartments has been received before issuance of completion certificate ("BCC") or before its first occupation, whichever is earlier.
Since the exemption is available only on transfer of development rights and/or FSI for construction of residential apartments, the exemption for projects as a whole is to be calculated as follows:
[GST payable on TDR and/or FSI for construction of project]
Carpet area of residential apartments in the project
total carpet area i.e. (total residential and
commercial carpet area of the project)
Consequence of a residential project not being fully sold on completion
Condition c) (above) requires receipt of consideration or part thereof from the buyers of residential apartments prior to receipt of BCC or first occupation, whichever is earlier, to avail exemption on transfer of development rights since such residential apartments would be sold prior to OC, and GST would be chargeable on the amounts paid by the purchaser.
However, if some residential apartments remain unsold even after occupation, the exemption to such extent becomes unavailable. The promoter becomes liable to pay GST, (at 1% on affordable residential apartments and at 5% on other residential apartments) on reverse charge basis, on such proportion of value of development rights, or FSI (including additional FSI), or both, as is proportionate to the un-booked residential apartments, on the date of BCC or first occupation, whichever is earlier.