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A builder is enter into joint development agreement with landlord to construct a residencial apartment total 8 flats are constructed out of which 3 flats given to land lord and balance 5 flats are sold the market/ registration value of each flat is Rs. 40 Lakhs ( Non metro city less than 90sqmts) , what is it the gst impact on the following ( jd agreement is on 01/02/2020) a. Towards development rights transferred by the landlord on which value gst is paid on RCM and when b. What is the gst on sale of balance 5 flats pls in simple words tell the amount of tax payable on RCM in amount and tax payable on sale value in amounts

A builder is enter into joint development agreement with landlord to construct a residencial apartment total 8 flats are constructed out of which 3 flats given to land lord and balance 5 flats are sold the market/ registration value of each flat is Rs. 40 Lakhs ( Non metro city less than 90sqmts) , what is it the gst impact on the following ( jd agreement is on 01/02/2020) a. Towards development rights transferred by the landlord on which value gst is paid on RCM and when b. What is the gst on sale of balance 5 flats pls in simple words tell the amount of tax payable on RCM in amount and tax payable on sale value in amounts

Reply—

a) As per FAQ issued by CBIC, provision of GST applicable on supply of development rights are as follows—

What is the rate of GST applicable on transfer of Development rights?

Supply of development right used for the construction of residential apartments in a project that are booked before issue of completion certificate or first occupation is exempt.

Supply of development rights on such value which is proportionate to construction of residential apartments that remain un-booked on the date of issue of completion certificate or first occupation, would attract GST at the rate of 18%, but the amount of tax shall be limited to1% or 5%of value of apartment depending upon whether the residential apartments for which such development right is used, in the affordable residential apartment category or in other than affordable residential apartment.

supply of development right for construction of commercial apartments shall attract GST of 18%. 

Who is liable to pay GST on development right?

The Promoter is liable to pay GST on supply of development rights on or after 01-04-2019 on reverse charge basis.

At what point of time, the Promoter should discharge its tax liability on supply of development right?

The liability to pay GST on development rights shall arise on the date of completion or first occupation of the project, whichever is earlier. Therefore, Promoter shall be liable to pay tax on reverse charge basis, on supply of Tdr on or after 01-04-2019, which is attributable to the residential apartments that remain un-booked on the date of issuance of completion certificate, or first occupation of the project. 

Tax liability on service by way of transfer ofDevelopment rights prior to 01-04-2019 is required to be discharged in terms of Notification No. 4/2018-CentralTax (Rate) dated 25.01.2018.

b) New GST rates (1% and 5%) effective from 01-04-2019 are applicable to construction of residential apartments in a project which commences on or after 01-04-2019.

1% GST — It is applicable on Affordable housing project. ( having carpet area upto 60 square meter in metropolitan cities and 90 square meter in cities or towns other than metropolitan cities and the gross amount charged for which, by the builder is not more than forty five lakhs rupees.)

The new tax rates shall be available subject to following conditions,-

(a) Input tax credit shall not be available,

(b)  80% of inputs and input services (other than capital goods, Tdr/ JDA, FSI, long term lease (premiums)) shall be purchased from registered persons. On shortfall of purchases from 80%, tax shall be paid by the builder @ 18% on RCM basis. However, Tax on cement purchased from unregistered person shall be paid @ 28% under RCM, and on capital goods under RCM at applicable rates.

Posted Date: Sep 05, 2020
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