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TMI Blog2020 (3) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar provision under the CGST or MPGST Act would be mentioned as being under the GST Act. 3. BRIEF FACTS OF THE CASE: 3.1 The applicant is partnership firm and engaged in the business of real estate developer and is developing a colony by executing joint development agreement on 14.03.2019 with the land owner M/s. Star Construction. In this project developer will develop and provide the following common facilities in the colony. 1. Construction of concrete roads and compound walls. 2. Development of garden. 3. Construction of drain and water supply system. 4. Erection of electric poles and transformers etc. 3.2 With due permission from the local municipal corporation. Developer will sale vacant plots to individual buyers and will not do any construction activities on these plots. No common facilities developed like road, garden, electric poles, water drainage etc. will be transferred / sold to buyers. 3.3 After development of all the above-mentioned common facilities, local municipal corporation will review and provide completion certificate to the developer and developer will hand over the colony to the municipal corporation for further maintenance. 4. QUESTIONS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), (15) and (16)" deals with the works and duties to be carried out by the applicant. 7.6 In Para (4)" says that it is land owner who has got diversification of land use to residential purpose. 7.7 The agreement further provides that once the project has been developed the applicant will ensure the sale of the plots. For selling any expenses incurred by the applicant will be recovered by the applicant from the purchaser and would be shared between land owner and applicant in a fixed ratio. 7.8 "Para (8)" of the agreement provides for the revenue sharing arrangement. The applicant is entitled to a revenue share equal to 40% of the sale value of each plot. The agreement also states that the security deposited by the applicant will be refundable within a stipulated time and if not it will be refunded with 18% percent per annum interest. 7.9 "Para (11)" of the agreement obliges the applicant to complete the work in a stipulated time. 7.10 In "Para (10)" it is the land owner who gives the right to the applicant to develop the land. 7.11 "Para (13) and (14)" entrust upon the land owner to pay any tax/rent and to settle any legal dispute regarding land. 7.12 "Para (15)": says that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of the land the agreement also clearly defines the scope of work to be undertaken by the applicant the main work to be carried out by the applicant the development of plots which also concludes construction of concrete roads and compound walls, development of garden, construction of drain and water supply system and erection of electric poles and transformer etc. Therefore it is very much clear that the activities to be undertaken by the applicant are in nature of development of land into residential layout. The agreement provides that the applicant can enter into sale agreements. However this activity is incidental to the main activity of development of land. The sale is entrusted to the applicant as the applicant has invested huge sums in the development of the land and it is a measure to protect his financial exposure in the matter. Here it becomes evident that the core competence and the activity actually carried out by the applicant is that of development of land and not the sale of land. The land owner still remains the land owner till the property is transferred in the name of purchaser. 7.18 The agreement also states that the land owner authorizes the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment of the site which includes civil construction and amenities regarding the site in order to make it for the purpose of residence. The services provided by the applicant are based on an agreement signed between the land owner and the applicant which comes under works contract. 7.25 The applicant has also raised that if the activity to be performed comes under works contract how the valuation would be done. GST Rule 30/31 will be considered or not. 7.26 The terms of the agreement provide that the cost of execution of the development of the land including the cost of fee payable to the architects, contractors, staff , workmen etc shall be borne by the applicant. Further it provides that the applicant recovers the cost from the purchasers of the plots. In this regard the provisions of Para 8 dealing with revenue sharing are worth noting. Para 8.1 provides that as and when any plot is sold, the proceeds shall be divided between the applicant and the landowners in the given ratio. This shows that the charges that the applicant receives for the services provided by them to the landowners for the development of the land are equal to their revenue share when the plots are sold. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also does not apply. Rule 29 and 30 also do not apply in the case. Consequently Rule 31 comes into play in the instant case Rule 31 provides that where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and the general provisions of section 15. 7.29 Section 15, as already discussed in para 7.27 above, provides that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration. In the instant case what the applicant receives as their remuneration for the provision of the services of development of the land and their subsequent activities related to the sale of the plots is an amount equal to 40% of the open market value of each plot. The arrangement is that the applicant shall get the amount only as and when the plots are sold. As already discussed earlier this arrangement, where the applicant gets paid for their services only upon the sale of the plots, enables the landowners to not t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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