• Joint development agreement landowner liability

I intend to give my land for development. We would build flats of area (built up) under 52 sq mtrs and carpet area 40 sq mtrs each. I hope these flats come under affordable housing scheme. DEveloper will give me 40% of the flats. So how much GST would i have to pay if i sell the flat while it is under construction? And What difference it makes for me if the developer opts for GST rate with set off or GST rate without set off? 
-Shirish
Asked 3 years ago in GST

Dear Sir,

 

Hope you are doing well !!

 

GST is though applicable to the supply of development rights, w.e.f.01.04.2019 the responsibility to pay tax is no more in the hands of the landowner, rather it is shifted to the builder under reverse charge mechanism (RCM). It is immaterial whether the landowner is registered under GST or not. So it can be construed that transfer of development right is not taxable in the hands of landowner w.e.f.01.04.2019. [Notification No. 13/2017-CT (R) dt. 28.06.2017 as amended by Notification No. 05/2019-Central Tax (Rate)] Dated: 29th March 2019]

 

In cases where landowner further sales his share of constructed area or flats allotted by the builder and he receives any amount as advance from the prospective buyers during the construction stage then the landlord will be liable to pay GST on it. No GST is applicable if such sales are made after completion of construction.

 

Rate of tax –

In case of further sales of area/flats by the landowner, he will be liable to pay tax @ 1% or 5% depending on the nature of the residential apartments viz: affordable or non-affordable category. However, if the developer opted for the existing system of 8%/12% then the landowner has also to opt for the same. (Refer FAQs dated: 14.05.2019). Further, he is also entitled to claim ITC charged by the builder in both the situation (old rates and new rates) on the consideration value against the transfer of development right in land.

 

We may discuss the issues further in detail.

 

 

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

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

- w.e.f. 01.04.2019, landowner is not liable to pay GST on the transfer of  land development rights. On or after 01.04.2019, builder/developer is liable to pay GST on reverse charge basis on  the unbooked units on the date of completion or first occupation whichever is earlier.  You are not liable to pay GST on sale of under construction flats even builder is also not liable to pay GST on  your share as it is booked before completion or occupation.

- In your case, income tax would be calculated under normal provisions of the act without giving effect of section 45(5A) as it is a sale before obtaining completion certificate for whole or part of the house.

 

For detailed discussion, please take phone consultation.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1029 Consultations

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