GST on TDR, Goods and Services Tax - GST

[Narayan Pujar]

Hi,

I have come across a transaction wherein the JDA has been entered in Pre-GST regime but the construction has been commenced and completed after 1-4-2019 [during new GST regime for real estate].

How will tax on the following be treated?

1. GST on development rights.

2. GST on construction services to landowners.

3. GST on sale of apartments to customers.

Will all or any be covered in ST with no implication under GST as the agreement was entered in Pre-GST?

Posts / Replies

[Sadanand Bulbule]

Dear querist

Refer the following judgement. The subject issue is well settled.

2024 (5) TMI 1254 - SC ORDER- PRAHITHA CONSTRUCTIONS PRIVATE LIMITED VERSUS UNION OF INDIA & ORS.

 

[Amit Agrawal]

As land development rights are already transferred in pre-gst regime (i.e. prior to 01.07.2017), there cannot be any GST imposed on landowner against land development rights so transferred by him.

Here, I am presuming that JDA is duly registered prior to 01.07.2017 & there is no dispute about factual position (i.e. land development rights are already transferred in pre-gst regime).

For above views, it is immaterial IMHO that actual construction was started & completed after 01.04.2019.  

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

The ruling quoted in post at Sr. No. 1 above (i.e. 2024 (5) TMI 1254 - SC ORDER- PRAHITHA CONSTRUCTIONS PRIVATE LIMITED VERSUS UNION OF INDIA & ORS.) has no application in the given facts by the querist here. 

This is because in Prahitha Constructions Private Limited Versus Union of India - 2024 (2) TMI 902 - TELANGANA HIGH COURT, it is noted in Para 3.2 that JDA was executed on 28.12.2017 (i.e. under GST regime). 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

And with regards to your second question (i.e.  GST on construction services to landowners), my views are as under:

Builder has received entire consideration from landowner under service tax regime. And, builder had agreed to provide construction services to the landowner through JDA executed under pre-gst regime. Hence, builder was liable to pay service tax on his construction services to the landowner and not builder. 

Again, for above views, it is immaterial IMHO that actual construction was started & completed after 01.04.2019.  

In this regard, your attention is invited to Section 66B of the Finance Act, 1994 (32 of 1994) read with Section 142(11)(b) of the CGST Act, 2017. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

And with regards to your third question (i.e.  GST on sale of apartments to customers), my views are as under:

IF customer has given consideration (at-least partly) to the builder before issuance of 'building completion certificate' and 'agreement to sale' between customer & builder is entered into under GST regime, then, GST will be payable against construction services provided by Builder to the customer.  

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Sadanand Bulbule]

Dear all

I have informed the querist to refer the Apex Court’s judgement. I have never said anything about its applicability or otherwise. Then why to create so much fuss on it? Does it not mislead the readers? 

The genius experts are free to express their “own views” and not to issue counter judgments. It’s not in good taste. 

[Amit Agrawal]

In my post at Sr. No. 4 above, please read relevant line in 2nd Para as follows: .............. .................. Hence, builder was liable to pay service tax on his construction services to the landowner and not GST. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

Dear Shri Sadanand Bulbule Ji,

In your post at Sr. No. 1 above, you have said that 'The subject issue is well settled' and quoted said SC ruling.

As I hold different views of yours for 'subject issue' raised by the Querist, I have quoted differential factual aspect (which lead to my difference of opinion from you) which are quoted from very same underlying HC judgement (NOT counter judgement) which was challenged by the party before SC. 

This was done to explain my view point & reasons better to the Querist and other readers of this forum. 

I do not see anything done in bad taste here. Also, if one quotes counter judgements to justify his / her own views, I do not see any harm to anyone there. One can always counter such counter judgements too. 

I just focus on legal issues under discussion. And I intend continuing doing do so even in future. 

[Amit Agrawal]

And hence & with all due respect, I repeat the following views of mine with some additions for better clarity:

The ruling quoted in post at Sr. No. 1 above (i.e. 2024 (5) TMI 1254 - SC ORDER- PRAHITHA CONSTRUCTIONS PRIVATE LIMITED VERSUS UNION OF INDIA & ORS.) has no application in the given facts by the querist here. 

This is because in Prahitha Constructions Private Limited Versus Union of India - 2024 (2) TMI 902 - TELANGANA HIGH COURT, it is noted in Para 3.2 that JDA was executed on 28.12.2017 (i.e. under GST regime). 

Said SC ruling has NOT dealt with the situation where the JDA was executed in pre-gst regime. And hence, it cannot be said that said SC ruling has settled subject issue raised by the querist (where he has categorically stated that the JDA was executed in pre-gst regime & had asked for implications under GST in given situation). 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Sadanand Bulbule]

Dear all

Plz refer Issue ID No.110308 on the subject under discussion. Further transfer of "Development Rights" being a "Construction Service" under Heading 9972 is taxable @18% as a supply of service under the GST Act.