2020 (2) TMI 554 - AAR - GST

Levy of GST - sale of Transferable Development Rights (TDR)/ Floor Space Index (FSI) received as consideration for surrendering the joint rights in land in terms of Development Control Regulations - Classification under GST laws - rate of GST - Circular F. No. 354/32/2019-TRU dated the 14th May, 2019, the Government of India, Ministry of Finance, Department of Revenue (Tax Research Unit), New Delhi. HELD THAT - GST is payable at the rate of 18% (9% 9%) on transfer of development rights or FSI (including additional FSI), under Sl. No. 16, item (iii) of Notification No. 11/2017 - Central Tax (Rate) dated 28-06-2017 (Heading 9972). The transactions of transfer of development rights/AdditionaI FSI are taxable under GST Laws @ 18% (9% CGST 9% SGST) under Sl. No. 16, item (iii) of Notification No. 11/2017 - C.T. (Rate) dated 28.06.2017 (Heading 9972).

Summary

Issues Involved:
1. Whether GST is leviable on the sale of Transferable Development Rights (TDR)/Floor Space Index (FSI) received as consideration for surrendering joint rights in land.
2. Classification under GST and applicable rate of GST for TDR/FSI.

Issue-Wise Detailed Analysis:

1. GST Leviability on Sale of TDR/FSI:

The applicant, an owner of land within Pune Municipal Corporation (PMC) limits, entered into an agreement with a developer to jointly develop the land and share profits. Subsequently, due to reservations on the land, the applicant and developer surrendered their rights to PMC, receiving TDR/Additional FSI as compensation. The applicant contended that the sale of TDR/Additional FSI should not be taxable under GST, arguing that it constitutes a sale of land/immovable property, which is covered under Clause 5 of Schedule III of the CGST Act. The applicant supported this by referencing various legal definitions and case laws, concluding that TDR/Additional FSI are benefits arising out of land and thus should be treated as immovable property.

However, the jurisdictional officer argued that the scope of services under GST is broad and includes TDRs, which should be treated as a service. Notifications and amendments, such as Notification No. 05/2019-C.T. (Rate) and Notification No. 04/2018-C.T. (Rate), indicate that the transfer of development rights is taxable under GST, specifically under the reverse charge mechanism.

2. Classification and Rate of GST:

The applicant made alternate submissions acknowledging that if the supply of TDR/Additional FSI is taxable, it would be considered a service. They referenced various notifications to argue that the applicable rate of GST should be determined based on the classification under Heading 9972 of Notification No. 11/2017-Central Tax (Rate). The jurisdictional officer supported this view, citing that the transfer of development rights is taxable at 18% (9% CGST + 9% SGST).

The authority reviewed the submissions and relevant notifications, including the FAQs issued by the Ministry of Finance, which clarified that GST on the transfer of development rights or FSI, including additional FSI, is payable at 18% under Heading 9972. Notifications No. 4/2018, 13/2017, and 5/2019 further support this classification and rate.

Judgment:

The authority concluded that GST is indeed leviable on the sale of TDR/FSI received as consideration for surrendering joint rights in land. The classification under GST falls under Heading 9972, with the applicable rate being 18% (9% CGST + 9% SGST).

Order:

1. GST is leviable on the sale of TDR/FSI received as consideration for surrendering joint rights in land.
2. The classification under GST is Heading 9972, with an applicable rate of 18% (9% CGST + 9% SGST).