Q 1 & Q 4 | Joint development of Land | Transfer of development rights | Practical FAQ's GST | ICAI

♥♥TELEGRAM CHANNEL LINK♥♥ I am practitioner (CA, CMA, CS, Lawyers, Accountants): https://t.me/taxbykk I am CA final student: https://t.me/cafinalgstkk I am CA inter student: https://t.me/cainterkk I am CMA inter student: https://t.me/cmainterkk I am CMA final student: https://t.me/cmafinalbykk I am CS Exe student: https://t.me/csexekk I am CS Profs student: https://t.me/csprofkk I am Law student: https://t.me/taxlawbykk ♥♥OUR STORE LINK♥♥ www.taxbykk.com ♥♥WHAT'S APP LINK♥♥ https://wa.me/919999227381 Q 1: Development of Land: Land development is the act of altering the landscape in many ways from natural or semi-natural state for a purpose such as agriculture or construction including subdividing it into plots, typically for the purpose of building homes or commercial complex.

Ans: Land Development in JDA: In the event of Joint Development, an agreement will be executed between the land owner and the builder. The rights for development will be given by the land owner and development will be carried out by the builder. As consideration for the development undertaken, the builder will be paid in the form of portion of the said developed land. In order to determine whether a transaction will constitute a supply under GST, the said transaction has to satisfy the rudiments of the definition under Section 7(1) (a) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

An excerpt from the definition is reproduced below: “7 (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, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;” The terms that are relevant for our consideration are “supply of service”, “made for a consideration” “by a person” and “in the course or furtherance of business” “Supply of service”: Anything other than goods is regarded as service as per the definition of the term ‘service’ under the GST law. Hence, the activity of development of land will be considered as service and when it is carried out for other, it becomes supply of service.

o “Made for a consideration”: Consideration for developing the land is obtained or normally agreed between the supplier and recipient as a portion or percentage of the developed land as per the agreement. o “By a person” – the definition of the term “person” is exhaustive and it includes anybody covered within the definition. o “In the course or furtherance of business” - the activity carried out is obviously in the course of business or furtherance of business. It is clear from the above that the activity of “development of land” is satisfying the rudiments of the term “supply” under the CGST Act. Hence, development of land under Joint Development Agreement will constitute a supply under GST. Q4. Whether developmental rights in land given by a land owner to a developer (in case of an agreement for area sharing or revenue sharing between the two) are to be considered as supply by the land owner in the course or furtherance of business?

Ans. The moot question is whether the transfer of development rights (TDR) being a “benefit arising out of land” can be deemed to be a supply under GST based on the judicial precedents given under the erstwhile indirect tax regime. However, Notification No. 4/2018 Central Tax (Rate) dated 25.01.2018 was issued notifying the applicability of GST on TDR. This notification deemed that the transfer of TDR will be a supply and liable under GST. Thus, the transfer of development rights by landowner to developer is treated as supply in which development rights are transferred in return for consideration that involves in kind, wholly or partly, in the form of construction service of complex, building or civil structure. Developmental rights in land given by a land owner to a promoter (in case of an agreement for area sharing or revenue sharing between the two) are to be considered as supply by the land owner in the course or furtherance of business. Further, Notification No. 05/2019-Central Tax (Rate) dated 29.03.2019 ["NN 5/2019-CTR"] was issued notifying that the services supplied by any person by way of transfer of development rights or floor space index (FSI) (including additional FSI) for construction of a project by a promoter would be chargeable to GST under RCM as per section 9(3) of the CGST Act, w.e.f. 1st April, 2019 ♥♥ABOUT CS K K AGRAWAL♥♥ GST Consultant | Trainer | Speaker | Faculty He is a company secretary and is a consultant, author, speaker, trainer and faculty of both Direct Tax and Indirect Tax having an experience of more than 20 years. He is a leading speaker on GST and has been speaking at various forums of ICAI and ICSI.