GST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS – PART IV:- Goods and Services Tax – GST – By: – Pradeep Jain – Dated:- 1-12-2017 – Treatment of Joint Development Agreements in GST regime is very critical. In earlier three parts of this series, we have discussed the liability on account of builder and land owner in respect of construction of flats. In this update, we shall discuss the very important and not much talked aspect of joint development agreement, i.e. transfer of land development rights. In joint development agreement, the land owner transfers the right to develop the land to the builder. The builder develops the land and undertakes the construction of flats. Once the flats are constructed, some of them are transferred to
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pment rights. It is worth noting here that the consideration received against transfer of land development rights is in form of flats received from the builder. Therefore, holding this view, there will be liability to pay tax on the transfer of land development rights. Another school of thoughts is of the opinion that it is outside the purview of GST as it is neither the supply of goods nor supply of service. It is worthwhile to mention here that schedule III of CGST Act, 2017 prescribes the list of transactions which are outside the purview of GST. Clause 3 of schedule III covers the sale of land. Therefore, where a transaction is of sale of land, it will be outside the purview of GST. This school of thought is of the view that the transfe
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er of land development rights – GST will be payable by the land owner. On construction of flats (whether sold to land owner or transferred to independent buyer) in accordance with schedule II [clause 5(b)] – GST will be payable by the builder. On further sale of flats by land owner from his share of received flats – GST will be payable by the land owner. Thus, following this view, GST will be levied twice in hands of land owner. However, it is worthwhile to mention here that as of now land owners are not paying any tax on the transfer of land development rights. It is worth noting here that the joint development agreements were given same treatment in the service tax regime also and no one was paying the tax on the land development rights.
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