GST liability of landlord in a JDA Telangana

Dear Sir,

In reference to your query please note as:

1. In so far as you are selling your share of villas before receipt of Occupation Certificate (OC), you are liable to charge GST from the buyer and deposit the same to the government. However, if you are effecting the sale after OC, and all proceeds are received after that only, then no GST would be leviable on those sale transactions.

Pertaining to the builder charging you GST, OC is irrelevant and he will be charging GST on all your share of villas as he is giving you construction service.

2. The existing GST rate is 5% w.e.f 1st April 2019, however your project has commenced before this period. In case of ongoing projects, an option was given by the Government to the builders, whether they want to stick to the previous rate of 12% or migrate to new rate of 5%.

In this case you need to seek confirmation from your developer, whether or not he has filed such declaration. If the builder has filed to continue charging GST @ 12% you may proceed so, however if no such declaration has not been filed, then you are bound to charge 5% only.

A lower rate of 1% has also been prescribed, however the same is applicable only when the carpet area is less than 60 sqm. as well as the total consideration received is less then INR 45 Lakhs. Since you do not satisfy both of the conditions, you will fall under 5%.

3.Please refer point 2 above. It would depend on the declaration submitted by the builder to the Government. If the builder opt to pay at higher rate, then you can also charge accordingly, else 5%.

3. Yes sir, you should take registration under GST, as there is no mechanism to pay taxes otherwise.

4. The changes in GST law w.e.f. 1st April 2019 have brought in a sea change, and have been linked with RERA. The key relevant change for the matter at hand is that in case of 5% tax, ITC has been disallowed, however the landowner has been given an exception. The landowner is allowed the ITC of GST charged to him by the developer, subject to the condition that the landowner sell his flat(s) before OC and the sale value is higher than the value at which the developer charges tax from the owner. So you would be eligible for ITC in either scenarios.

However please note and plan with the developer, that he issues you his bill before you issue your bill to your buyers, so that you can take credit of the developer's bill and adjust the same from your outgoings, otherwise this liability would have to be paid by you in cash, and the developer's GST charged on you could go to waste leading to a double blow.

5. Dear Sir, I am based in Kolkata and am dealing with major real estate players here. In this time of online era, most of the work can be done digitally without physical presence. I would be more than happy to be associated with you, should you agree.

Please advise in case of any other clarification.

Thanks & Regards,

CA Aditya Dhanuka.

Sir, the option to charge is on the buyer and not on the seller.

Further if we deep dive into the same, in case of 12% chargeability the promoter is allowed ITC, and as per anti profiteering clauses, he should be passing on the said benefit to the buyer; while in case of 5% there is not ITC allowed.

Therefore the cost of construction would vary depending on the tax structure.

The actual tax rate is 18% & 7.5%.

1/3 deduction is allowed by the government, and the rates are therefore commonly referred to as 12% & 5%.

If no declaration has been filed by the promoter, then you would fall under 5% category.

RERA makes both the Promoters and the landlord or any such parties which are beneficiary of a sale of a project and receive payments from Allottees as Co-Promoters and hence liable to adhere to the provisions of the Act and Rules and Regulations made there under.

You should therefore again concur with the developer, if he included you as co-promoter in the RERA registration taken.

Please advise in case of any other clarification.

Thanks & Regards,

CA Aditya Dhanuka.

Kindly do not see the JDA transaction only from GST perspective. Also look it from Income tax perspective. It is advisable to sell all villas after obtaining OC. 

- As JDA was registered in 2018,supply of development rights was taxable in the hands of landowner. On or after 01.04.2019, it is taxable in the hands of builder on RCM basis.

1. In your case, sale of villas and collection of entire consideration before receiving OC will be taxable and you are liable to pay GST. Sale of villas subject to collection of entire consideration after receiving OC is exempt.

2. It should be 12%

3. No

4. refer point no.1

It may be treated as an ongoing project subject to facts of the case. w.e.f 01.04.2019, new rates (i.e. 1% or 5%) without ITC are applicable to builder on construction of residential apartments. For an ongoing project, option of old rates with ITC was available subject to conditions.

Dear Sir,

I stand by my previous opinion and would request you to go through again. Complete and detailed solution is already provided.

In case of any confusion, please feel free to connect.

Please advise in case of any other clarification.

Thanks & Regards,

CA Aditya Dhanuka.