The Authority for Advance Ruling (AAR), Karnataka has held that the Goods and Services Tax ( GST ) shall be paid by the developer on the value of building constructed and handed over to the landowner under a Joint Development Agreement (JDA).
The applicant entered into an agreement with 6 people for construction & to handover residential apartment area, commercial area and 8 car parking on land belonging to aforesaid six persons. The project was completed after the GST rollout.
Before the authority, the applicant claimed that it was liable to pay service tax on the taxable value of building constructed & handed over to the landowner at time of completion of the project at the rate of 12 percent on the aggregate value of building constructed and handed over to the landowner and the underlying value of land.
The issue before the authority was that whether it was liable to pay GST on the value of building constructed and handed over to landowner in terms of Joint Development Agreement and if there was liability to pay GST on what value was GST to be paid since there was no monetary consideration involved and, further, whether applicant was liable to pay service tax up to 30-6-2017 and GST thereafter.
The authority held that where applicant entered into an agreement for supply of construction service of building with a landowner against consideration in form of transfer of development rights, applicant was liable to pay GST towards construction service provided by it to landowner and value on which applicant was liable to pay GST was to be determined in terms of para 2 of Notification No. 11/2017 – Central Tax (Rate) dated 28-6-2017.
It was observed that the applicant is supplying construction service of building/civil structure to the supplier of development rights (landowner) against consideration in form of transfer of development rights. Notification No. 4/2018 – Central Tax (Rate) dated 25-1-2018, at para (b), stipulates that supplier of construction service, to supplier of development rights, is liable to pay GST for service provided to the landowner in terms of Joint Development Agreement.
“Therefore, the applicant is liable to pay GST on the value of building constructed and handed over to the landowner in terms of Joint Development Agreement. The value on which applicant was liable to pay GST were to be determined in terms of para 2 of Notification No. 11/2017 – Central Tax (Rate) dated 28-6-2017. The applicant is liable to pay service tax/GST proportionate to services provided before/after 30-6-2017 respectively,” the authority said.
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