GST on Transfer of Property under Tripartite Agreement
By: – CASanjay Kumawat
Goods and Services Tax – GST
Dated:- 20-12-2017
(Continue from Part-I)
STAGE III: SALE/TRANSFER OF FLATS BY THE LANDOWNER
* Taxability of transfer/sale of flats by the landowner
In normal parlance, in tri-partite agreements, the under-construction flats are transferred by the builder to the land owner. The tax on these flats is paid as and when the pre-defined level of construction is reached. Thus, the builder pays the tax on these flats just like he pays the tax on the flats sold to independent buyers. However, if the land owner further sells these under construction flats, he shall also be liable to pay the tax as it will be treated as an independent transaction.
As per Clause 5(b) to Schedule II to CGST Act, 2017 read with Section 7 of the CGST Act, 2017, reads as follows:-
"(b) construction of a complex, building, civil structure or a part thereof, including a complex or bu
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after completion certificate or the occupancy certificate, whichever is earlier, and then in that case GST shall not be applicable in accordance with Clause 5 of the Schedule-III of the CGST Act, 2017.
STAGE IV: SALE/TRANSFER OF FLATS BY THE BUILDER/DEVELOPER
Taxability of transfer/sale of flats by the Builder/Developer
In case of builder/developer, same ratio shall apply as discussed in case of the sale of flats by the landowner. Accordingly, if builder sales under construction flats then it will be considered as supply of construction services in accordance with Clause 5(b) of the Schedule-II of the CGST Act, 2017, accordingly, GST will be applicable.
Alternatively, where entire consideration has been received after obtaining completion certificate or the first occupancy certificate, whichever is earlier, and then in that case GST shall not be applicable in accordance with Clause 5 of the Schedule-III of the CGST Act, 2017.
STAGE V: TIME OF SUPPLY
Relevant provisions for
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ax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following dates, namely:-
* the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or
* the date on which the supplier receives the payment with respect to the supply.
STAGE VI: VALUATION
Relevant provisions for Valuation under GST
As per section 15 of the Act, 2017, (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
(2) The value of supply shall include
* …………..
* …………..
* &he
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f 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;
(d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order.
STAGE VII: INPUT TAX CREDIT
Relevant provisions for Input Tax Credit under GST
As per section 16 of the CGST Act, 2017,
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
(2) Notwithstanding anything contained in
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redit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
(4)……………………………
(5) Notwithstanding anything contained in sub-section (1) of section 16 an
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from landowner's view]:
* Result in transfer of interest in land (TDRs result in Sale of land):
* Taxability: Not taxable under GST as per Clause 5 of the Schedule-III of the CGST Act, 2017 read with Section 7 of the CGST Act, 2017.
Input Tax Credit: Common credits need to be reversed as per section 17(2) & (3) of the CGST Act, 2017.
Result in non-transfer of interest in land (License to occupy land):
* Taxability: Taxable under GST as per Clause 2(a) of the Schedule-II of the CGST Act, 2017 read with Section 7 of the CGST Act, 2017.
Time of supply: Receipt of license amounts to advance receipt of consideration in kind. Hence, date when license are received will be time of supply.
Valuation: Value is to be determined as per Rule 27 of the CGST Rules, 2017.
Input Tax Credit: Input tax credit is available as per section 16 read with section 17 of the CGST Act, 2017.
Rate of Tax- 18%
Transfer of flats by the builder/developer to the landowner [from builder's/developer'
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obtaining the requisite approvals, the flats meant for landowner and builder are identified and a Supplementary Agreement is entered into for this purpose. It can be said that upon entering into such Supplementary Agreement the landowner recognises the receipt of services in his books of accounts. Or sometimes, the landowner may recognises the receipt of services (flats) only at the time of handing over of flats to him. But from builder's point of view it would be very difficult to conclude when the landowner recognises receipt of service. In this connection, a person may refer to the CBEC Instruction F.No.354/311/2015 Dt. 20.01.2016, wherein in the context of point of taxation under service tax it has been clarified as,
“Service tax is liable to be paid by the builder/developer on the 'construction service' involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering int
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icate or first occupancy certificate, whichever is earlier (Construction services):
* Taxability: GST is payable as it is supply of services as per clause 5(b) of the Schedule-II of the CGST Act, 2017 read with Section 7 of the CGST Act, 2017.
Time of supply for Continuous supply of service: On stage of completion of supply and date on which advance received.
Valuation: Value is to be determined as per section 15 of the CGST Act, 2017 read with Rule 27 of the CGST Rules, 2017, if required.
Input Tax Credit: Input tax credit is not available as it is restricted by section 17(5) (c) & (d) of the CGST Act, 2017.
Rate of Tax- 18% subject to paragraph 2 of the Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 (i.e., value of land is to be received where consideration includes the same)
Transfer of flats by the builder/developers
* Entire consideration received after obtaining completion certificate or first occupancy certificate, whichever is earlier (Sale of flat
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