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    QuickRef GST Changes JDA 1

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    umesh bagwale
    The document summarizes changes to GST taxability for joint development agreements from the developer's perspective, both before and after April 1, 2019. Key points include: 1) Before April 2019, the transfer of development rights from the landowner to developer for residential or commercial projects was subject to 18% GST, payable by the landowner. For area sharing deals, tax was due on possession transfer. 2) After April 2019, residential project taxes are lower of 18% on development rights value or 1-5% of unsold units' value, payable by developer on completion. Commercial projects remain 18% paid by developer on billing or completion. 3) Exemptions were introduced for

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    QuickRef GST Changes JDA 1

    Uploaded by

    umesh bagwale
    38 views8 pages
    The document summarizes changes to GST taxability for joint development agreements from the developer's perspective, both before and after April 1, 2019. Key points include: 1) Before April 2019, the transfer of development rights from the landowner to developer for residential or commercial projects was subject to 18% GST, payable by the landowner. For area sharing deals, tax was due on possession transfer. 2) After April 2019, residential project taxes are lower of 18% on development rights value or 1-5% of unsold units' value, payable by developer on completion. Commercial projects remain 18% paid by developer on billing or completion. 3) Exemptions were introduced for

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    Joint Development Agreement under GST

    Original Title

    QuickRef-GST-Changes-JDA-1

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    The document summarizes changes to GST taxability for joint development agreements from the developer's perspective, both before and after April 1, 2019. Key points include: 1) Before April 2019, the transfer of development rights from the landowner to developer for residential or commercial projects was subject to 18% GST, payable by the landowner. For area sharing deals, tax was due on possession transfer. 2) After April 2019, residential project taxes are lower of 18% on development rights value or 1-5% of unsold units' value, payable by developer on completion. Commercial projects remain 18% paid by developer on billing or completion. 3) Exemptions were introduced for

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    38 views8 pages

    QuickRef GST Changes JDA 1

    Uploaded by

    umesh bagwale
    The document summarizes changes to GST taxability for joint development agreements from the developer's perspective, both before and after April 1, 2019. Key points include: 1) Before April 2019, the transfer of development rights from the landowner to developer for residential or commercial projects was subject to 18% GST, payable by the landowner. For area sharing deals, tax was due on possession transfer. 2) After April 2019, residential project taxes are lower of 18% on development rights value or 1-5% of unsold units' value, payable by developer on completion. Commercial projects remain 18% paid by developer on billing or completion. 3) Exemptions were introduced for

    Copyright:

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    of 8

    GST CHANGES - JOINT DEVELOPMENT AGREEMENT

    DEVELOPER’S POINT OF VIEW


    (CRISP MATERIAL – NOT IN DEPTH)

    CA KARISHMA CHAWLA
    BASIC DETAILS

    1) a) There has been complete change in the GST taxability for real estate sector
    w.e.f 1st April 2019. Therefore, all related provisions i.e. the rate of GST,
    person liable to pay GST, timing of GST payment, related exemption etc. are
    different up till 31st March 2019 and from 1st April 2019.

    1) b) In this document we shall go through the changes on taxability for joint


    development agreement before and after 1st April 2019.

    1) c) This document discusses compliances only from Developer’s point of


    view & not landowner’s.

    Page2|8
    JDA & ITS TAXABILITY UNDER GST

    Joint Development Agreement: An arrangement whereby a landowner


    contributes his land for the construction of a real estate project and developer
    undertakes the responsibility for the development of property, obtaining
    approvals, performing legal formalities and marketing the project. The landowner
    enters into an agreement and gives a General Power of Attorney to the developer,
    assigning him duty to obtain the mandatory approvals from various authorities
    and allows the developer to enter the land and do all necessary things for
    undertaking the construction.

    Types of Joint Development Agreement:


    1. Area Sharing Agreement

    Pure Residential Project


    Pure Commercial Projects
    Residential cum Commercial Projects

    2. Revenue Sharing

    3. Combination of Area & Revenue Sharing

    2) A) Taxability of JDA under GST:


    Taxable Limbs or Taxable Events in such arrangement are as follows: (Refer Note
    below)
     Revenue Sharing or Area Sharing - Transfer of development right from
    landowner to developer.

     Area Sharing – Provision of construction services by developer to landowner


    in lieu of development rights given.

    Note: Above taxable events are restricted to the possibility of tax liability arising
    due to JDA arrangement.

    Page3|8
    2)A) i) Transfer of Development Right from Landowner to Developer:
    Projects as recognized by GST Law (same as RERA):

    REP: Any project other than a RREP is a “Real Estate Project”.

    RREP: A “Residential Real Estate Project” means a „Real Estate Project” in which
    the carpet area of the commercial apartments is not more than 15 per cent. of the
    total carpet area of all the apartments in the project.

    I. POSITION UP TO 31st MARCH 2019:

    a) Type of agreement: Revenue or Area or Both

    b) Type of Construction: Residential or Commercial

    c) Rate of GST: 18 percent. (Supply of “service” being development right


    supplied or given to developer SAC 9972).

    d) Payable by: Landowner on Forward charge. (NN 11/2017- Other real estate
    services)

    e) Timing of Liability:

    i. Monetary Consideration (Revenue Sharing):

    As per Section 13 (GST payable in month of issue of Invoice if invoice


    issued within 30 days of receipt of payment otherwise month of
    receipt of payment, basically immediately on receipt of payment from
    developer)

    ii. Non-monetary consideration (Area Sharing):


    Up to 24th Jan 2018: As per Section 13.
    From 25th Jan 2018 to 31st March 2019: GST was payable when
    there is transfer of possession or rights in the constructed area by
    entering in to conveyance deed or similar document e.g. issue of
    allotment letter. (NN 4/2018)

    f) Value of Supply: As per Rule 27 of the CGST Rules (Open Market Value,
    Similar Apartment – of like kind, quality value etc.) (with 1/3rd land
    deduction)

    Page4|8
    II. POSITION AFTER 1st APRIL 2019:

    FOR RESIDENTIAL APARTMENTS IN THE PROJECT


    (So, it can be a residential project or commercial project or both, but the following
    applies to residential apartments)

    a) Type of agreement: Revenue or Area or Both (Monetary or Non-Monetary


    Consideration)

    b) Rate of GST: Lower of :

    Un-booked carpet area of


    Residential apts. on date of
    = Issue of OC X 18% of Value of Development Right
    Total carpet area of residential (Value as per Next Point (i))
    Apartments in project

    = 1 or 5 percent as applicable of the value of residential apartments remaining


    un-booked on the date of OC (Value as Next point (ii)).

    (How to determine the area which is un-booked on the date of OC?


    An apartment booked on or before the date of issuance of completion
    certificate or first occupation of the project shall mean an apartment which
    meets all the following three conditions, namely-

    i. part of supply of construction of the apartment service has time of supply


    on or before the said date; and

    ii. consideration equal to at least one instalment has been credited to the
    bank account of the registered person on or before the said date; and

    iii. an allotment letter or sale agreement or any other similar document


    evidencing booking of the apartment has been issued on or before the
    said date.)

    c) Value of Supply:

    i. Value of Development Right (DR) against non-monetary consideration in


    the form of residential or commercial apartments shall be deemed to be
    equal to value of similar apartments charged by promoter from
    independent buyers nearest to the date on which such DR or FSI is
    supplied to the promoter.

    ii. Value of portion of residential or commercial apartments remaining un-


    booked on the date of issuance of OC shall be deemed to be equal to the

    Page5|8
    value of similar apartments charged by the promoter nearest to the date
    of issuance of OC.

    d) Payable by: Developer under RCM as per above mentioned method.

    e) Timing of Liability: Date of completion (Date of issue of CC/OC) (even if


    monetary consideration is given – ONLY FOR RESIDENTIAL APTS.)

    (For commercial apartments in a RREP – & monetary consideration given -


    TOS – shall be immediately. For non-monetary – Date of OC)

    f) Exemption: Exemption has been provided for the supply of service of


    TDR/FSI ON OR AFTER 1st April 2019 for construction of residential
    apartments (NOT COMMERCIAL APARTMENTS) by a promoter in a
    project which is booked before the date of issuance of OC/CC.

    (Amt. of exemption available for construction of residential apartments


    in the project:
    GST payable on TDR or FSI (incl. addl. FSI) or both for construction of
    the project X carpet area of the residential apartments in the project
    ÷ Total carpet area of the residential and commercial apartments in the
    project)
    (NN 04/2019-CT (Rate) dated 29th March 2019)

    Page6|8
    FOR COMMERCIAL PROJECT (REP) or COMMERCIAL APARTMENTS in a
    RREP

    a) Type of agreement: Revenue or area sharing

    b) Rate of GST: 18 percent

    c) Payable by: Developer under RCM (NN 5/2019 dated 29th March 2019)

    d) Timing of Liability:

    i. Monetary Consideration (Revenue Sharing):

    As per Section 13 (GST payable in month of issue of Invoice if


    invoice issued within 30 days of receipt of payment otherwise
    month of receipt of payment, basically immediately on receipt of
    payment from developer)

    ii. Non-monetary consideration (Area Sharing):

    Date of issuance of OC (NN 6/2019 dated 29th March 2019)

    e) Value of Supply: Full value of Development Right against consideration


    in the form of construction of apartments shall be deemed to be equal to
    the total amount charged for similar apartments in the project from the
    independent buyers nearest to the date on which such development
    right or FSI is supplied to the promoter less the value of transfer of land
    i.e. 1/3rd deduction. (NN 3/2019 dated 29th March 2019)

    Page7|8
    END OF DOCUMENT

    In case of any feedback or queries, please mail it to [email protected]

    The opinions expressed in this booklet are those of the author. They do not purport to reflect
    the opinions or views of the GST Council or Department. While we have taken every
    precaution to ensure that the content of this booklet is current and accurate, errors can
    occur. The information contained in this booklet is general and not case-specific, and should
    not be considered to be legal, tax, accounting, consulting or any other professional advice. In
    all cases you should consult with professional advisors familiar with your particular factual
    situation for advice concerning specific matters before making any decisions. Kindly send
    feedback on above mentioned email address if the content was helpful to you, we shall be
    obliged. Also, kindly do send your suggestions or opinion in case you have found an error in
    the material that we must rectify or have a different view point for the same.
    All rights reserved. No part of this write-up may be reproduced, stored in a retrieval system,
    or transmitted, in any form, or by any means, electronic, mechanical, photocopying,
    recording, or otherwise other than the recipient without prior permission, in writing, from the
    author.

    Page8|8

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