Webinar by Jaipur Branch of CIRC of ICAI May 2020 · An agreement between a landowner and a real...

Analysis of Joint Development Agreement (JDA) under GST

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Webinar by Jaipur Branch of CIRC of ICAI – 30th May 2020

https://www.youtube.com/watch?v=EyujBY5K4IM

https://www.youtube.com/watch?v=EyujBY5K4IM

Six Important Steps Under GST

Levy

Supply (r.w. Exemption Notifications for Goods/Services)

Time of Supply

Value of Supply

Place of Supply

Rate of Taxation

Flow of Presentation

Basic Understanding of JDA & IT’s Taxability

Relevant Definition, Section & Rules

Taxability of Landowner

Taxability of Developer

Practical Examples

Some Important FAQ’s, Rulings

Basic Understanding of JDA & IT’s Taxability

What is JDA ?

Landowner Developer

An agreement between a landowner and a real estate developer (Builder) toconstruct a real estate project is called a Joint Development Agreement.

Primarily reason of the JDA:- Non Expertise of Land owner in construction:- Better Sale Value for Land to Land Owner:- To construct a House for Residence of Land Owner:- Non Availability of Funds to Purchase Land with Developer:- Developer has Expertise in construction as well as in marketing

Area Share

Revenue Share

Area +

Revenue

Residential

Residential Commercial

Commercial Residential

Commercial

Major Types of JDA

▪ Generally on the Basis of Current Market Value of the Land (Landowner Mr.Akshay) and on the basis of estimated cost of Construction (Developer - DLF),land owner and developer decides there share:-

▪ Estimated Share Between Land Owner (Akshay) and Developer (DLF) may be30% and 70% respectively (30:70)

Please note that the share distribution also depends on various things like Expertise ofdeveloper, location of land etc. and accordingly revised by both the parties as permutual understanding

Basis of Share

Particulars Amount (In Crores)

A. Estimated Market Value of Land or DLC 30

B. Estimated Value of Constr. Cost 70

C. Estimated Project Value (A+B) 100

D. Estimated Sale Value (100 Units 1.20 Crore Each) 120

Particulars Land Owner (Akshay) Developer (DLF)

Area 30 Units 70 Units

Revenue 36 Crore(120Cr*30 Units) 84 Crore(120Cr*70 Units)

TDR from Land owner to Developer

His Share of Flat/Units Sale to Buyers(Before CC/FO)

Taxable Events Under JDA – Area Share

His Share of Flat/Units Sale to Buyers(Before CC/FO)

Construction of Flat/Units for Land Owner

Landowner Developer

TDR from Land owner to Developer

Taxable Events Under JDA – Revenue Share

His Share of

Flat/Units Sale

to Buyers

Construction of Units for Land Owner

Landowner Developer

Flat/Units Sale to Buyers(Before CC/FO)

Relevant Definition, Section & Rules

Section- 2(52) -“goods” means every kind of movable property other thanmoney and securities but includes actionable claim, growing crops, grass andthings attached to or forming part of the land which are agreed to be severedbefore supply or under a contract of supply;

Section- 2(102) -“services” means anything other than goods, money andsecurities but includes activities relating to the use of money or its conversionby cash or by any other mode, from one form, currency or denomination, toanother form, currency or denomination for which a separate consideration ischarged;

Section- 2(119) -“works contract” means a contract for building, construction,fabrication, completion, erection, installation, fitting out, improvement,modification, repair, maintenance, renovation, alteration or commissioning of anyimmovable property wherein transfer of property in goods (whether as goods orin some other form) is involved in the execution of such contract;

Relevant Provisions of GST - Definitions

N/N – 03/2017 – Central Tax Rate(xvi) the term “affordable residential apartment” shall mean, -(a) a residential apartment in a project which commences on or after 1st April, 2019, or in an ongoingproject in respect of which the promoter has not exercised option in the prescribed form to pay centraltax on construction of apartments at the rates as specified for item (ie) or (if) against serial number 3,as the case may be, having carpet area not exceeding 60 square meter in metropolitan cities or 90square meter in cities or towns other than metropolitan cities and for which the gross amount chargedis not more than forty five lakhs rupees.

For the purpose of this clause, -(i) Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida,Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with theirrespective geographical limits prescribed by an order issued by the Central or State Government in thisregard;

(ii) Gross amount shall be the sum total of; -A. Consideration charged for the services specified at item (i) and (ic) in column (3) against sl. No. 3 inthe Table;B. Amount charged for the transfer of land or undivided share of land, as the case may be including byway of lease or sub lease; andC. Any other amount charged by the promoter from the buyer of the apartment including preferentiallocation charges, development charges, parking charges, common facility charges etc.


N/N – 03/2017 – Central Tax Rate

(xviii) the term “Real Estate Project (REP)” shall have the same meaning as assigned to it inin clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16of 2016)

RERA Definition:-(zn) "real estate project" means the development of a building or a buildingconsisting of apartments, or converting an existing building or a part thereof intoapartments, or the development of land into plots or apartment, as the case may be, forthe purpose of selling all or some of the said apartments or plots or building, as thecase may be, and includes the common areas, the development works, all improvementsand structures thereon, and all easement, rights and appurtenances belonging thereto;

(xix) the term “Residential Real Estate Project (RREP)” shall mean a REP in which thecarpet area of the commercial apartments is not more than 15 per cent. of the total carpetarea of all the apartments in the REP;


Section 7 Scope of Supply(1) For the purposes of this Act, the expression “supply” includes––

(a) all forms of supply of goods or services or both such as sale, transfer,barter, exchange, license, rental, lease or disposal made or agreed tobe made for a consideration by a person in the course or furtheranceof business;

(b) ……(c) ……(d) the activities to be treated as supply of goods or supply of services

as referred to in Schedule II

(2) Notwithstanding anything contained in sub-section (1),––(a) activities or transactions specified in Schedule III;(b) ………

shall be treated neither as a supply of goods nor a supply of services.

Relevant Provisions of GST - Supply

Schedule II (Section 7) ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

5. Supply of servicesa) ……..b) construction of a complex, building, civil structure or a part thereof, including acomplex or building intended for sale to a buyer, wholly or partly, except wherethe entire consideration has been received after issuance of completioncertificate, where required, by the competent authority or after its firstoccupation, whichever is earlier.

Schedule III (Section 7) ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATEDNEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale ofbuilding.

Relevant Provisions of GST – Supply Schedule

Section- 9 (1) -“Levy and collection” Subject to the provisions of sub-section (2), thereshall be levied a tax called the central goods and services tax on all intra-State supplies ofgoods or services or both, except on the supply of alcoholic liquor for human consumption,on the value determined under section 15 and at such rates, not exceeding twenty percent., as may be notified by the Government on the recommendations of the Council andcollected in such manner as may be prescribed and shall be paid by the taxable person.

Section- 13 -“Time of supply of Services”(1) ………….(2) The time of supply of services shall be the earliest of the following dates, namely:—(a) the date of issue of invoice by the supplier, if the invoice is issued within theperiod prescribed under sub-section (2) of section 31 or the date of receipt of payment,whichever is earlier; or(b) the date of provision of service, if the invoice is not issued within the periodprescribed under sub-section (2) of section 31 or the date of receipt of payment,whichever is earlier; or(c) the date on which the recipient shows the receipt of services in his books ofaccount, in a case where the provisions of clause (a) or clause (b) do not apply:

Relevant Provisions of GST- Levy & Time of Supply

Section- 15 -“Value of Taxable Supply”(1) The value of a supply of goods or services or both shall be the transactionvalue, which is the price actually paid or payable for the said supply of goods or servicesor both where the supplier and the recipient of the supply are not related and the price isthe sole consideration for the supply. (Value Received)

Rule 27. Value of supply of goods or services where the consideration is not wholly inmoney.-Where the supply of goods or services is for a consideration not wholly in money,the value of the supply shall,-(a) be the open market value of such supply; (Value Supply)(b) if the open market value is not available under clause (a), be the sum total ofconsideration in money and any such further amount in money as is equivalent to theconsideration not in money, if such amount is known at the time of supply; (ValueReceived)(c) if the value of supply is not determinable under clause (a) or clause (b), be the value ofsupply of goods or services or both of like kind and quality; (Value Supply- Similar ProductServices)(d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sumtotal of consideration in money and such further amount in money that is equivalent toconsideration not in money as determined by the application of rule 30 or rule 31 in thatorder.

Relevant Provisions of GST – Value of Supply

Rule 30. Value of supply of goods or services or both based on cost.-Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. (Value Supply)

Rule 31.Residual method for determination of value of supply of goods or services or both.-Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this Chapter: . (Value Received)

Provided that in the case of supply of services, the supplier may opt for this rule, ignoring rule 30.

Relevant Provisions of GST – Value of Supply

Para 2 A- N/N 03/2019 r.w. 11/2017 Central Tax (Rate)Where a registered person transfers development right or FSI (including additional FSI) to a promoteragainst consideration, wholly or partly, in the form of construction of apartments, the value ofconstruction service in respect of such apartments shall be deemed to be equal to the Total Amountcharged for similar apartments in the project from the independent buyers, other than the persontransferring the development right or FSI (including additional FSI), nearest to the date on which suchdevelopment right or FSI (including additional FSI) is transferred to the promoter, less the value oftransfer of land, if any, as prescribed in paragraph 2 above.” (Construction Services Value Allocated toLand Owners in the Case of Commercial & Residential Both (REP & RREP)

N/N 04/2019 r.w. 12/2017 Central Tax (Rate)Para “1A. Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter. TDR Value – RREP/REP)

Para 1B. Value of portion of residential or commercial apartments remaining un-booked on the date of issuance of completion certificate or first occupation, as the case may be, shall be deemed to be equal to the value of similar apartments charged by the promoter nearest to the date of issuance of completion certificate or first occupation, as the case may be.”

Relevant Provisions of GST – Value of TDR & Construction Service to Land Owner

Section- 31 -“Tax Invoice”(1)……

(2) A registered person supplying taxable services shall, before or after the provisionof service but within a prescribed period, issue a tax invoice, showing the description,value, tax charged thereon and such other particulars as may be prescribed:

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuoussupply of services,––(a) where the due date of payment is ascertainable from the contract, the invoiceshall be issued on or before the due date of payment;(b) where the due date of payment is not ascertainable from the contract, theinvoice shall be issued before or at the time when the supplier of service receives thepayment;(c) where the payment is linked to the completion of an event, the invoice shallbe issued on or before the date of completion of that event.

Rule - 47 -“Time Limit for Issuing Tax Invoice”The invoice referred to in rule 46, in the case of the taxable supply of services, shall beissued within a period of thirty days from the date of the supply of service:

Relevant Provisions of GST – Tax Invoice

Section- 12 – IGST Act 2017 -“Place of supply of services where location of supplier and recipient is in India.”

(1)……(2)…...(3) The place of supply of services,––

(a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovableproperty or for carrying out or co-ordination of construction work; or

shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Relevant Provisions of GST – Place of Supply

N/N 03/2019 Central Tax (Rate):-Condition to avail 7.5% GST Rate (Effectively 5% GST Rate), 1.5% GST Rate (Effectively 1% GSTRate)

Where a registered person (landowner- promoter) who transfers development right or FSI(including additional FSI) to a promoter (developer- promoter) against consideration, whollyor partly, in the form of construction of apartments, -

(i) the developer- promoter shall pay tax on supply of construction of apartments to thelandowner- promoter, and

(ii) such landowner – promoter shall be eligible for credit of taxes charged from him by thedeveloper promoter towards the supply of construction of apartments by developer-promoter to him, provided the landowner- promoter further supplies such apartments tohis buyers before issuance of completion certificate or first occupation, whichever is earlier,and pays tax on the same which is not less than the amount of tax charged from him onconstruction of such apartments by the developer- promoter.

Relevant Provisions of GST – Residential- Construction Services by Developer to Land owner

Taxability of Landowner

Is GST Applicable on Transfer of Development right (TDR) ?

GST is Applicable on Supply of Goods or Services or Both

Land is Immovable Property which is Neither Goods nor Services

Further as per Schedule III Sale of Land is Not a Supply of goods or

Services

Immovable Property Includes TDR or Not ?

Development Right:-❑Right to develop the Land for Residential, Commercial

or Agriculture Use❑Land like any other asset, contains a bundle of several

right that accrue to it❑Several Rights that may be identified with land are

development right, cultivation right etc.❑It is a right given by the Statutory body in respect of

land to construct /develop it up to a certainpermissible right


Definition of Immovable Property:-❑ RERA Act 2016 – Section 2(Z)"immovable property" includes land, buildings, rights of ways, lights or anyother benefit arising out of land and things attached to the earth or permanentlyfastened to anything which is attached to the earth, but not standing timber, standingcrops or grass;

❑ The Transfer of Property Act, 1882The TPA Act has not defined this term, It only says that “immovable property” does not includestanding timber, growing crops or grass.

❑ The General Clause Act, 1897(26) “immovable property” shall include land, benefits to arise out of land, and thingsattached to the earth, or permanently fastened to anything attached to the earth;


SR Relevant Case Laws Held

1.Chheda Housing Development

Corporation (Bombay HC)

TDR is a benefit arising from the landthus ‘immovable property’

2.Sadoday Builders Private Limited

(Bombay HC)

TDR is a benefit arising from the landthus ‘immovable property’

3. Shakti Insulated Wires Limited DR are embedded in land

4. Titaghur Paper Mills 1985 AIR 1293

A benefit arising out of land is an interestin land and therefore immovableproperty

5.Safiya Bee

(2011) 2 SCC 94

‘Land’ includes rights in or over land,

benefits to arise out of land. The Apex

court in the case of Pradeep Oil

Corporation vs Municipal Corporation

of Delhi – (2011) 5 SCC 270 observed

that land includes benefits to arise out

of land.



6

DLF COMMERCIAL PROJECTS [2019 (27) GSTL 712 (Tri. - Chan.)

16. … As the Hon’ble High Court observed in the case ofSadoday Builders Private Ltd. and Ors. (supra) thattransferrable development right is immovable property,therefore, the transfer of development rights in the casein hand is termed as immovable property in terms ofSection 3(26) of General Clauses Act, 1897 and no servicetax is payable as per the exclusion in terms of Section 65B(44) of the Finance Act, 1994.

17. We also take a note of the fact that from time to time the query was made to the Revenue by the trade organization as well as M/s. DLF Ltd. whether they are liable to pay service tax on transfer of development right of land or not and the same was not answered till yet which means revenue itself is not clear whether the said activity is taxable service or not. In that circumstances, we hold that the extended period of limitation is not invokable and it cannot be said that the appellant did not pay service tax with mala fide intentions.



7.

Tata Sky Ltd 2013 (30) S.T.R. 337 (S.C.)

Coming now to the notification datedMay 5, 2008, it is elementary that anotification issued in exercise of powers under the Act cannot amend the Act….The notification cannot enlarge eitherthe charging section or amend theprovision of collection under section 4 ofthe Act read with the 1942 Rules.


Suggestion:-Is GST Applicable on Transfer of Development right (TDR) ?

Step:-1 Calculate Estimated Total Tax Outflow by Assuming TDRis Taxable (Input Tax Available to Builder/Developer)

Step:2 Calculate Total Tax Outflow by Assuming TDR is NotTaxable

Step:-3 If there is no difference or very low difference in the Taxliability then take 1st Assumption

Step:-4 If there is Higher Tax Liability by assuming that TDR isTaxable then you may go into litigation and adopt Step 2

Please note that in the Next Slides I am assuming thatTDR is Taxable and discussed accordingly

Landowner - Levy & Supply

Particulars TDR from Land owner to Developer

His Share of Flat/Units Sale to Buyers (Before

CC)

Levy (Section 9 of CGST ACT)

Discussed as above

Yes, Under Service Category (r.w. para 5(b) of Schedule II to Section 7 of CGST ACT

Supply Discussed as above

Supply as per Section 7 (1) of CGST ACTr.w. para 5(b) of Schedule II to Section 7 of CGST ACT

Landowner – Time of Supply of Services

Particulars TDR from Land owner to Developer His Share of Flat/Units Sale to

Buyers (Before CC)

Time of Supply of Services

1st July 2017 to 24th Jan. 2018With in 30 days of Supply of Services (Section 13 r.w. Section 31 r.w. Rule 47)

25th Jan 2018 to 31st March 2019Pure Revenue Share Same as earlier(Section 13 r.w. Section 31 r.w. Rule 47)

Area Share or Area With Revenue ShareTransfers possession or the right in the Project to the land owner by entering into a conveyance deed or similar instrument (for example allotment letter). (NN.4/2018- Central Tax (Rate)

1st April 2019 Onwards Date of issuance of CC or on Its First Occupation, whichever is earlier(Notification 6/2019 CT (Rate) dated 29th March 2019)

If payment is linked to the completion of an event, the invoice shallbe issued on or before the date of completion of that event.

(As per Section 13 of the CGST ACT r.w. Section 31(5)(c) )

Landowner – Value of Taxable Supply

Particulars TDR from Land owner to Developer His Share of Flat/Units Sale to Buyers (Before CC)

Value Of Taxable Supply

1st July 2017 to 31st March 2019:-Residential & Commercial As per Section 15 r.w. valuation rules, may be possible by way of DLC Value of TDR (Rule 27)

After 1st April 2019 Onwards:-Revenue ShareSame as earlier

Area ShareCommercial:-Nearest Sale value from JDA date to Independent Buyer for similar apartment

Residential:-Residential is Exempt except if units unsold remains as on CC/First Occupation Date:-Tax payable on such proportion of value of development rightswhich remain un-booked on the date of issuance of completioncertificate and Sale value will be taken on CC/First Occupation date to Independent Buyer for similar apartment

04/2019 CT (Rate) dated 29th March 2019

2/3RD Value is Taxable of amount charged

1/3RD Value deemed to be the Land Value and hence not taxable As per Schedule III

Notification 11/2017 r.w. 3/2019 CT (Rate) dated 29th March 2019

Landowner – Place of Supply & Tax Rate


Place of Supply (Section 12 of IGST ACT)

Location of Immovable Property - Sec. 12(3)(a) Location of Immovable Property - Sec. 12(3)(a)

Rate of Taxation

Supply of TDR of land used for the constructionof residential apartments in a project that arebooked before issue of completion certificate orfirst occupation is exempt.

Supply of TDR , on such value which isproportionate to construction of residentialapartments that remain un-booked on the dateof issue of completion certificate or firstoccupation, would attract GST at the rate of18%, but the amount of tax shall be limited to1%or 5% of value of apartment depending uponwhether the residential apartments for whichsuch TDR is used, in the affordable residentialapartment category or in other than affordableresidential apartment.

Notification 3/2019 CT (Rate) dated 29th March 2019 r.w. Notification11/2017 CT (Rate)

Commercial:-1st July 2017 to 31st March 201918% With ITC (Effectively 12%)

1st April 2019 OnwardsREP - 18% With ITC (Effectively 12%) RREP- 7.5 % Without ITC (Effectively 5%)

Landowner – Tax Rate


Rate of Taxation TDR for construction of commercial apartmentsshall attract GST of 18%

Residential :-1st July 2017 to 24.01.201818% With ITC (Effectively 12%)

25.01.2018 to 31st March 2019 Affordable -12% With ITC (Effectively 8%)

Non Affordable 18% With ITC (Effectively 12%)

1st April 2019 Onwards Affordable -1.5% (Effectively 1%)

Non Affordable 7.5% (Effectively 5%)

(ITC Available To Landowner in Case of JDA)

Landowner – Tax Payable Under RCM or FCM

Particulars TDR from Land owner to Developer


CC)

Tax is Payable by

1st July 2017 to 31st

March 2019

Payable by Land Owner

1st April 2019 Onwards

Developer/Builder i.e. Service Recipient under Reverse Charge (In Cash)

Payable By Developer

Taxability of Developer

Developer - Levy & Supply

Particulars Construction of Units for Land Owner (Area

Share)


CC)

Levy (Section 9 of CGST ACT)

Yes, Under Service Category (r.w. para 5(b) of Schedule II to Section 7 of CGST ACT

Supply Supply as per Section 7 (1) of CGST ACTr.w. para 5(b) of Schedule II to Section 7 of CGST ACT

Developer – Time of Supply of Services

Particulars Construction of Units for Land Owner His Share of Flat/Units Sale to Buyers (Before

CC)

Time of Supply of Services

1st July 2017 to 24th Jan. 2018(As per Section 13 of the CGST ACT r.w. Section 31(5))

25th Jan. 2018 to 31st March 2019Transfers possession or the right in the Project to the land owner by entering into a conveyance deed or similar instrument (for example allotment letter). (NN.4/2018- Central Tax (Rate)

1st April 2019 Onwards Date of issuance of CC or on Its First Occupation, whichever is earlier(Notification 6/2019 CT (Rate) dated 29th March 2019)

If payment is linked to the completion of an event, the invoice shallbe issued on or before the date of completion of that event.

(As per Section 13 of the CGST ACT r.w. Section 31(5)(c) )

Developer – Value of Taxable Supply

Particulars Construction of Units for Land Owner His Share of Flat/Units Sale to Buyers (Before C

Value Of Taxable Supply

1st July 2017 to 31st March 2019:-As per Section 15 r.w. valuation rules, may be possible by way of DLC Value of TDR (Rule 27(b)) (Received Value) Or As per Section 15 r.w. valuation rules, may be possible by way of 110% of Cost of construction (Rule 30)

(No deduction of 1/3d value of Land as the same not included)

1st April 2019 Onwards:-All types of ProjectsNearest Sale value from JDA date to Independent Buyer for similar apartment

Para 2A - 03/2019 CT (Rate) dated 29th March 2019

2/3RD Value is Taxable of amount charged

1/3RD Value deemed to be the Land Value and hence not taxable As per Schedule III

Notification 11/2017 r.w. 3/2019 CT (Rate) dated 29th

March 2019

Developer – Place of Supply & Tax Rate

Particulars Construction of Units for Land Owner His Share of Flat/Units Sale to Buyers (Before CC)

Place of Supply (Section 12 of IGST ACT)

Location of Immovable Property - Sec. 12(3)(a)

Location of Immovable Property - Sec. 12(3)(a)

Rate of Taxation

Notification 3/2019 CT (Rate) dated 29th March 2019 r.w. Notification 11/2017 CT(Rate)

Commercial:-1st July 2017 to 31st March 201918% With ITC (Effectively 12%)

1st April 2019 OnwardsREP - 18% With ITC (Effectively 12%)

RREP- 7.5 % Without ITC (Effectively 5%)


Developer –Tax Rate or Tax Payable Under RCM or FCM

Particulars Construction of Units for Land Owner His Share of Flat/Units Sale to Buyers (Before CC)

Rate of Taxation

Residential :-1st July 2017 to 24.01.2018

18% With ITC (Effectively 12%)

25.01.2018 to 31st March 2019 Affordable -

12% With ITC (Effectively 8%)

Non Affordable 18% With ITC (Effectively 12%)

1st April 2019 Onwards Affordable -

1.5% Without ITC (Effectively 1%)

Non Affordable 7.5% Without ITC (Effectively 5%)


Tax is Payable by Service Provider i.e. Landowner Service Provider i.e. Developer

Practical Examples

Some Other Relevant Details

1. JDA- Area Share – Residential – After 1st April 2019Particulars Amount (In Crores)





Particulars Remarks

Area Share Land Owner (Akshay) – 30 Units & Developer (Akshay) 70 units

JDA Date 30th May 2020

CC/FO Date 17th Feb. 2022

Carpet Area 2000 Sq Feet (Total 2000*100 = 200000 Sq Feet)

Unsold Units till CC/FO Date i.e. 17th

Feb. 2022All Units sold before 17th Feb. 2022

Estimated GST Input on Construction Cost

(DLF)7 Crores

1. JDA- Area Share – Residential – After 1st April 2019Taxable Events Land Owners Liability

(Akshay)

Developers Liability

(DLF)

On Transfer of Development

Right (TDR) by Land Owner to

Developer (A) Liability Shifted on developer Exempt as No Unsold Units

On Sale of his Share (Land

Owner) (B)

1.8 Crore

(30 Units*1.2 Crore*2/3rd*7.5%) -

On Construction Services to

Land Owner by Developer (C)

1.8 Crore

(30 Units*1.2 Crore*2/3rd*7.5%)

On Sale of his Share (Developer)

(D)

4.2 Crore

(70 Units*1.2 Crore*2/3rd*7.5%)

Total GST Liability (E) 1.8 Crore 6.0 Crore

Input (F) 1.8 Crore Input not Available

GST Payable in Cash (G = E-F) NIL 6.0 Crore


2. JDA- Area Share – Residential – After 1st April 2019Particulars Amount (In Crores)





Particulars Remarks






Feb. 2022

10 Units unsold of Developer before 17th Feb. 2022 (Carpet Area 2,00,000*10/100 = 20,000 carpet Area unsold)


(DLF)7 Crores

2. JDA- Area Share – Residential – After 1st April 2019Taxable Events Land Owners Liability

(Akshay)


(DLF)

On Transfer of Development Right

(TDR) by Land Owner to Developer

(A) Liability Shifted on developer

0.6 Crore

Whichever is Lower

(10 Units*1.2 Crore*2/3rd*7.5%=0.6

Crore)

Or

(20000/200000*1.2

Crore*100*2/3rd*18%=1.44 Crore)

On Sale of his Share (Land Owner)

(B)

1.8 Crore

(30 Units*1.2 Crore*2/3rd*7.5%) -

On Construction Services to Land

Owner by Developer (C)

1.8 Crore

(30 Units*1.2 Crore*2/3rd*7.5%)

On Sale of his Share (Developer) (D) 3.6 Crore

(60 Units*1.2 Crore*2/3rd*7.5%)

Total GST Liability (A+B+C+D=E) 1.8 Crore 6.0 Crore

Input (F) 1.8 Crore Input not Available


3 & 4 JDA- Revenue Share – Residential – After 1st April 2019Taxable Events 3. Developers Liability

(DLF)

1st Case = No Unsold Units


(DLF)

2nd Case = 10 Unsold Units



(A) Exempt as No Unsold Units

0.6 Crore

Whichever is Lower

(10 Units*1.2 Crore*2/3rd*7.5%=0.6

Crore)

Or

(20000/200000*1.2

Crore*100*2/3rd*18%=1.44 Crore)

On Sale of Units by Developer (B) 6.0 Crore

(100 Units*1.2

Crore*2/3rd*7.5%)

5.4 Crore

(90 Units*1.2 Crore*2/3rd*7.5%)

Total GST Liability (A+B=C) 6.0 Crore 6.0 Crore

Input (D) Input not Available Input not Available

GST Payable in Cash (E = C-D) 6.0 Crore 6.0 Crore

No Liability of GST on Landowner in this Case as Tax On Development Right Payable Under Reverse Charge


5. JDA- Area Share – Commercial – After 1st April 2019Particulars Amount (In Crores)





Particulars Remarks






Feb. 2022All Units sold before 17th Feb. 2022


(DLF)7 Crores

5. JDA- Area Share – Commercial – After 1st April 2019Taxable Events Land Owners Liability

(Akshay)


(DLF)



Developer (A) Liability Shifted on developer

4.32 Crore

(30 Units*1.2 Crore*2/3rd*18%)


Owner) (B)

4.32 Crore

(30 Units*1.2 Crore*2/3rd*18%) -


Land Owner by Developer (C) 4.32 Crore



(D)

10.08 Crore



Input (F) 4.32 Crore 11.32 Crore

(4.32 Crore+7 Crore)



6. JDA- Area Share – Commercial – After 1st April 2019Particulars Amount (In Crores)





Particulars Remarks






Feb. 2022

10 Units unsold before 17th Feb. 2022 (Carpet Area 2,00,000*10/100 = 20,000 carpet Area unsold)


(DLF)7 Crores

6. JDA- Area Share – Commercial – After 1st April 2019Taxable Events Land Owners Liability

(Akshay)


(DLF)



Developer (A) Liability Shifted on developer

4.32 Crore



Owner) (B)

4.32 Crore

(30 Units*1.2 Crore*2/3rd*18%) -


Land Owner by Developer (C) 4.32 Crore



(D)

08.64 Crore



Input (F) 4.32 Crore 10.188 Crore

(4.32 Crore+7 Crore=11.32

Crore*1800000/200000)


7 & 8 JDA - Revenue Share – Commercial – After 1st April 2019Taxable Events (7) Developers Liability

(DLF)

3rd Case= No Unsold Units

(8) Developers Liability

(DLF)

4th Case = 10 Unsold Units



(A)

4.32 Crore


4.32 Crore


On Sale of Units by Developer (B) 14.40 Crore

(100 Units*1.2 Crore*2/3rd*18%)

5.4 Crore

(90 Units*1.2 Crore*2/3rd*7.5%)

Total GST Liability (A+B=C) 18.72 Crore 6.0 Crore

Input (D) 11.32 Crore

(4.32 Crore+7 Crore)

10.188 Crore

(4.32 Crore+7 Crore=11.32

Crore*1800000/200000)

GST Payable in Cash (E = C-D) 7.4 Crore 7.092 Crore

No Liability of GST on Landowner in this Case as Tax On Development Right Payable Under Reverse Charge

Some Important FAQ’s & Rulings

Some Important FAQ- F. No. 354/32/2019-TRUDated the 7th May & 14th May, 2019, New Delhi

S.No. FAQ Answer

1

Land Owner being an individual is notengaged in the business of landrelating activities and thus whetherthe transfer of development rights byan individual to a promoter is liablefor GST and whether the same will fallwithin the scope of „Supply‟ asdefined in Section 7 of CGST / SGSTAct, 2017? Position of such atransaction may be clarified in light ofamendments recently made.

The term business has been assigned a very widemeaning in the CGST Act and it includes any trade,commerce, manufacture, profession, vacation,adventure, or any other similar activity whether or notit is for a pecuniary benefit irrespective of the volume,frequency, continuity or regularity of such activity ortransaction. Therefore, the activity of transfer ofdevelopment rights by a land owner, whether anindividual or not, to a promoter is a supply of servicesubject to GST.

2

In an area sharing model, a promoterhas to handover constructed Units/apartments to the land owner whosupplied TDR for the project. Value ofTDR at the time when the landownertransferred it to the promoter is notknown. How would the promoterdetermine GST on TDR?

Value of TDR, shall be equal to the amount charged bythe promoter for similar apartments from theindependent buyers booked on the date that is nearestto the date on which such development rights or FSI istransferred by the land owner to the promoter.

S.No. FAQ Answer

3

If an un-registered person transfersdevelopment right to a developer-promoter, then it is apparently notcovered by the fourth provisoapplicable to clause (i) to clause (id)of serial 3 of Notification No.11/2017 (as amended). Will thepromoter be liable to pay GST onTDR received from an unregisteredland owner?

Promoter shall be liable to pay GST on TDRtransferred by any person whether registered or noton RCM basis.

4

Whether the exemption given byway of Entry 41A / 41B ofNotification No. 12/2017-CTR shallbe available in respect ofdevelopment rights etc. transferredto a person other than promoter?Please clarify whether sub-clause(v) in clause (zk) in section 2 in RERAAct, 2016 covers a person whopurchases TDR as developer?

The exemption is available only on TDR/ FSItransferred on or after 1st April, 2019 forconstruction of residential apartments by apromoter in a real estate project.

Some Important FAQ- F. No. 354/32/2019-TRUDated the 7th May & 14th May, 2019, New Delhi

Some Relevant RulingsS.No. Rulings

1

Durga Projects & Infrastructure (P.) Ltd [2019] 108 taxmann.com 105 (AAR– KARNATAKA)Partially completed Units having identified customers before GST regimeand agreement executed prior to 01.07.2017, applicant builder is liable topay service tax proportionate to services provided up to 30-6-2017 andfrom 1-7-2017 onwards, it is liable to pay GST proportionate to servicesprovided effective from 1-7-2017, in terms of section 142(11)(b).

Partially completed Units, where customers are identified afterimplementation of GST and agreement has been entered into after01.07.2017 but before issuance of completion certificate from competentauthority, applicant-builder is liable to pay GST on transaction value ofsupply u/s 15.

Partially completed Units, where no customers are identified afterimplementation of GST and no agreement has been entered into beforeissuance of completion certificate from competent authority, applicant-builder is not liable to pay GST as per Entry no. 5 of Schedule-III.

Some Relevant RulingsS.No. Rulings

2

MAARQ Spaces (P.) Ltd., [2019] 111 taxmann.com 368 (AAR – KARNATAKA)Applicant has entered into a joint development agreement withlandowners for development of land into residential layout and cost ofdevelopment shall be borne by applicant and revenue accruing from sale ofplots is shared in ratio of 75 per cent for landowners and 25 per cent forapplicant, activities undertaken by applicant amount to supply of service tolandowners and taxable value of supply in terms of rule 31 ( residuaryrules using reasonable means consistent with the principles and thegeneral provisions of section 15) is equal to total amount received byapplicant. Similar view in case of Satyaja Infratech by Gujrat AAR2020(4)TMI 633.

3

Vilas Chandanmal Gandhi [2020] 114 taxmann.com 239 (AAR -MAHARASHTRA)

In case of applicant, owner of land, GST is leviable on amount receivedon sale of Transferable Development Rights ('TDR')/Floor Space Index('FSI') for surrendering joint rights in terms of Development ControlRegulations granted in light of agreement entered into betweenapplicant and Pune Municipal Corporation ('PMC')

CA Akshay K. Jain [email protected]

+91 99-5005-4004

Provided on request for academic use only, request you to read relevant provisions under GST Act & Rules to avoid any type of loss due to error/omission or take professional advice

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