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TMI BlogGST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS - PART I:-X X X X Extracts X X X X X X X X Extracts X X X X ..... GST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS - PART I:- - By: - Pradeep Jain - Goods and Services Tax - GST - Dated:- 22-11-2017 - - GST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS - PART I:- Joint Development Agreements are also called tri-partite agreements as three parties are involved in such contracts, namely a builder, land owning party and the contractor who undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes construction services. The developer enters into a development agreement with landowner, whereby the developer acquires the development rights with respect to the land. The development right entitles the developer to obtain licenses and approvals from the government authorities, construct the building on the land as per its own design and architecture, determine the price of the units, negoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate and enter into flat buyers agreements and execute sale deeds with buyers. The transfer of development rights by landlord to developer involves payment of consideration. Such consideration is generally given in kind by way of ownership rights of certain percentage of the developed area. The developer receives consideration normally in two ways: From landowner, in the form of land /dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment rights; and From other buyers, in the form of money Let us take an illustration. For instance assume, ABC developers limited enters into a agreement with land owner Mr. XYZ whereas in lieu of this agreement a total of 1000 residential units will be constructed by ABC ltd on the land provided by Mr. XYZ whereas 40% of the units i.e. 400 units shall be given to Mr. XYZ and rest 600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units shall be taken by ABC ltd. Both can commercially sell the units in the open market. Land owner gets 400 units of flats in lieu of the land given and Developer gets 600 units of flats in lieu of the construction work done. Based on above, redevelopment transaction is a barter transaction between landowner and developers. Here developer is providing construction service to landowner. Value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction service shall be ascertained on the basis of flats given to landowner in exchange of development rights given by him to builder. Further, as per decisions taken in 14th Meeting of the GST Council held on May 18-19, 2017 in Srinagar, J K ; 18 sectoral groups have been constituted representing various sectors of the economy in order to ensure smooth roll-out of GST. One such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectoral group is MEDIA ENTERTAINMENT SECTORAL GROUP which has issued some FAQs on GST in respect of Construction of Residential Complex by Builders/Developers. In these FAQs, following clarification has been given in respect of land owner's share of the flats/houses:- Q.16) Whether GST is payable on the owner's share of the flats/houses/portion of the building constructed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... builder/developer and given to the land owner as per the development agreement? Ans. 16:- The builder/developer is liable to pay GST even on the share of the land owner and given in lieu of the land received for the development, besides GST on the builder/developer's share of the complex/building. In the above transaction, the builder/developer receives consideration for the const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. Thus the builder is liable to pay GST not only on his portion of the complex/building, but also on the share of the land owner. Therefore, the above stated clarification also proves that there is no ambiguity on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue that the GST is payable even on landowner's share of flats. The other aspects like point of taxation and valuation, etc. will be discussed in the subsequent part of this series. You can reach us at www.capradeepjain.com - Reply By Subodh Modak as = If it is Revenue sharing like out of each receipt say fort y percent goes to land lord towards cost of land, will this be covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under gst? Seondly if a security deposit is accepted while entering such agreement what will be gst position on deposit accepted Such Revenue sharing agreement is entered bfr 30th June 2017 what will be the position under gst? Dated: 22-11-2017 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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