ITPJG_Art715 - Taxpublishers.in

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The Tax Publishers GST--TDR GST on Transfer of Transferable Development Rights (TDR) CA. Satyadev Purohit The learned author aims at making an overview of the levy of GST on transfer of Transferable Development Rights including levy of tax on reverse charge mechanism and exemption applicable to such services. 1. Transfer of development rights by land owner to builder Normally, a builder/developer constructs a complex or building on any land owned by other party. The builder and land owner enters into a land development agreement under which the land owner agrees to transfer Development Rights to the builder who constructs an apartment on the land and allots constructed area/flats/shops/commercial units (gala) to the land owner in the form of consideration. In the activity of transfer of development rights, the following services are involved, namely; (i) Transfer of development Rights in respect of land by land owner or society or tenant; (ii) Transfer of Development Rights by Government in case of slum rehabilitation project; (iii) Transfer of Transferable Development Rights (TDR) or Floor Space Index (FSI); (iv) Long term lease of land (for 30 years or more). 2. Transfer of development rights--Meaning When a land owner transfers development rights to promoter, he receives flats or units as consideration after completion of the project. Where a Housing Society wants to get new building constructed in place of the old building, it grants development rights to the builder for construction of new building. The promoter constructs new building after demolishing old building and gives agreed construction area to the flats owners/tenant without any monetary consideration. The remaining flats/units are sold by the developer. These transactions are regarded as transfer of development rights in which the land owner supplies services by way of transfer of development rights and the promoter provides construction services to the land owner, Society and prospective buyers. Transfer of development rights (TDR) by the land owner to the builder is regarded as 'supply' within meaning of section 7 of the CGST Act and the consideration received by the land owner in the form of flats/shops/commercial units (gala) free of cost is chargeable to tax under the GST regime. Upto 31-3-2019, the GST on these services was payable by the land owner or tenant on forward charge basis. With effect from 1-4-2019, the above service is chargeable to tax on Reverse charge basis. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--TDR

GST on Transfer of Transferable Development Rights (TDR)

CA. Satyadev Purohit

The learned author aims at making an overview of the levy of GST on transfer of Transferable Development Rights including levy of tax on reverse charge mechanism and exemption applicable to such services.

1. Transfer of development rights by land owner to builder

Normally, a builder/developer constructs a complex or building on any land owned by other party. The builder and land owner enters into a land development agreement under which the land owner agrees to transfer Development Rights to the builder who constructs an apartment on the land and allots constructed area/flats/shops/commercial units (gala) to the land owner in the form of consideration.

In the activity of transfer of development rights, the following services are involved, namely;

(i) Transfer of development Rights in respect of land by land owner or society or tenant;

(ii) Transfer of Development Rights by Government in case of slum rehabilitation project;

(iii) Transfer of Transferable Development Rights (TDR) or Floor Space Index (FSI);

(iv) Long term lease of land (for 30 years or more).

2. Transfer of development rights--Meaning

When a land owner transfers development rights to promoter, he receives flats or units as consideration after completion of the project.

Where a Housing Society wants to get new building constructed in place of the old building, it grants development rights to the builder for construction of new building. The promoter constructs new building after demolishing old building and gives agreed construction area to the flats owners/tenant without any monetary consideration. The remaining flats/units are sold by the developer.

These transactions are regarded as transfer of development rights in which the land owner supplies services by way of transfer of development rights and the promoter provides construction services to the land owner, Society and prospective buyers.

Transfer of development rights (TDR) by the land owner to the builder is regarded as 'supply' within meaning of section 7 of the CGST Act and the consideration received by the land owner in the form of flats/shops/commercial units (gala) free of cost is chargeable to tax under the GST regime.

Upto 31-3-2019, the GST on these services was payable by the land owner or tenant on forward charge basis. With effect from 1-4-2019, the above service is chargeable to tax on Reverse charge basis.