• GST on land owners share

We the Landowners entered into a Development Agreement dated.15.11.2017 with a Developer to develop our open land in to Villas with 52:48 ratio and subsequent to all approvals from different competent authorities we entered into a supplementary agreement dt.18.01.2019 wherein specific allotment of Villas to both parties were decided with right to sell their respective share of villas. Project commenced after 01.04.2019 and Developer is paying GST at 5% on their sales.
My questions are:
1. Who is liable to pay GST on Land owners share Land owners or Developers.
2. As per Notification 4/2019-CTR dt.29.03.2019 GST on land owners share is to be paid by Developer, but they gave a formula for payment. Please clarify that formula for payment of GST.
3. when is GST payable on Land owners share.
Asked 18 days ago in GST

Dear Sir,

 

Hope you are doing well !!

 

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:

  1. Transfer takes place on or after 1st April 2019;
  2. 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
  3. 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]

x

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.

 

Payal Chhajed
CA, Mumbai
4309 Answers
69 Consultations

5.0 on 5.0

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
4309 Answers
69 Consultations

5.0 on 5.0

- Transfer of TDR by the landowner to the promoter as a supply of service under GST. In case of transfer of TDR, point of taxation arises on the date of transfer of TDR. In your case, TDR was transferred on 15.11.2017 therefore liability to pay tax on the supply of TDR is on the landowner. However, landowner is liable to pay GST on the date of possession of the flats or allotment letter whichever is earlier. Value of supply would be the cost of the construction proportionate to your share.

Vivek Kumar Arora
CA, Delhi
3603 Answers
208 Consultations

5.0 on 5.0

- It is advisable to take a phone consultation for detailed discussion. In writing it is not possible to discuss all the things in detail.

Vivek Kumar Arora
CA, Delhi
3603 Answers
208 Consultations

5.0 on 5.0

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