As per new provisions, where land owner has transferred development rights on or after 01st April 2019 to a builder for construction of a project, the land owner is relieved from payment of tax on transfer of such development rights, since the liability is shifted to the developer under RCM basis as per Notification No. 05/2019-CTR dated 29.03.2019.
However, the payment of tax on said development rights is exempted, subject to the following conditions (refer Notification No. 04/2019-CTR dated 29.03.2019.
- i) The exemption is granted only to the extent of development rights pertaining to residential apartments. Hence, if a land owner transfers development rights in a project where commercial and residential apartments are intended, then exemption shall be only to the extent of tax payable on development rights pertaining to residential apartments; and
- ii) the exemption is applicable only to the extent of residential apartments booked as on the date of Completion Certificate.
In simple words, the builder is responsible to pay the tax on the value of TDR or FSI (Floor Space Index), etc., received for construction purpose. However, exemption is applicable in respect of residential apartments to the extent of flats booked as on the date of completion certificate or its first occupation, whichever is earlier. In other words, the builder is required to pay the proportionate tax on the basis of residential flats unsold by such date.
Hence, builder shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of development rights or FSI (including additional FSI), or both, as is attributable to the residential apartments, which remain unsold on the date of issuance of completion certificate, or first occupation of the project, as the case may be.
GST shall be payable @ 1% in case of affordable housing and 5% in case of residential apartment other than affordable housing, subject to developer shall not claimed ITC.
TAX RATE ON UNREGISTERED SUPPLIES TO DEVELOPERS
Notification No- 8/2019-CTR dated 29.03.2019 has amended the Notification No- 2/2017-CTR dated 28.06.2017 Central Tax @ 9% and State Tax @ 9% has been prescribed by amendment to the Notification No- 1/2017 dated 28.06.2017
Nature of Supply- Supply of any goods other than cement and capital goods by an unregistered person to promoter for the construction of project.
GST shall be payable by the developer as the recipient of the goods on RCM basis under Section 9(4) of CGST Act, 2017.
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