GST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS – PART II:- Goods and Services Tax – GST – By: – Pradeep Jain – Dated:- 24-11-2017 Last Replied Date:- 26-11-2017 – In the previous update we canvassed the taxability of joint development agreements under GST Regime. Through this update we would like to enumerate the provisions concerning the time of supply and the valuation of service in respect to the joint development agreements. It is pertinent to mention that there is no express provision as regards joint development agreements. Consequently, the time of supply will be ascertained on the basis of most appropriate clause. As per section 12(2) of the CGST Act, 2017, the time of supply of goods shall be the earlier of the following:- • Date of issue of invoice by the supplier or the last date on which he is required to issue of invoice for supply, or • Date on which the supplier receives payment with respect to the supply. As no invoice is issued by the developer to th
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t value of such supply. If the open market value is not available, it will be determined as total consideration received in money or its equivalent. If value cannot be determined by this formulae, it will be the value of supply of like goods/services. As per the above provisions, the value of flats given to land owner shall be open market value being the value of flats on the date of transfer of joint development rights. Say for example, on the date of transfer of joint development rights, developer sold 10 flats at the rate of ₹ 30,00,000/- then the value of flats to be given to the land owner will be valued at ₹ 30,00,000/-. However, if the open market value is not available, the value of flats shall be the value of flats of like kind and quality at about the same time. Say for example, the value of flat in the region of the same specification is 32,00,000/- then the value of flats given to land owner will be valued at ₹ 32,00,000/-. If we compare the provisions of
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sfer of development rights to the developer by the land owner. This will be great hardship to the developer as entire GST would be payable in the beginning as against payment of tax on periodical basis. Further, the builder is liable to pay GST on the owner's share of the flats/houses/portion of the building constructed by the builder/developer and given to the land owner as per the development agreement. The issue to be dealt here is what shall be the taxable value. As per decisions taken in 14th Meeting of the GST Council held on May 18-19, 2017 in Srinagar, J&K; 18 sectoral groups have been constituted representing various sectors of the economy in order to ensure smooth roll-out of GST. One such sectoral group is MEDIA & ENTERTAINMENT SECTORAL GROUP which has issued some FAQs on GST in respect of Construction of Residential Complex by Builders/Developers. In these FAQs, following clarification has been given in respect of land owner's share of the flats/houses throu
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is known at the time of supply; (c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality; In view of the above provisions, the value of supply of those flats would be equal to the value of similar flats charged by the builder/developer from the buyers of his share of flats. In case the prices of flats/houses undergo a change over the period of sale (from the first sale of flat/house in the residential complex to the last sale of the flat/house), the value of similar flats as are sold nearer to the date on which land is being made available for construction should be used for arriving at the value for the purpose of tax. Therefore, the above clarification given by the media and entertainment sectoral group are of great help in determining the taxability of flats sold to land owner. Though these FAQs don't have any legal binding, yet since there is no clarification on these points, the
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