GST on Construction under JDA: AAR clarifies Composite Sale Deed Execution Does not Fall u/Schedule III as 'Sale of Land' [Read Order]

The Tamil Nadu Authority for Advance Ruling (AAR) has ruled that a composite sale deed executed by a landowner for undivided share of land (UDS) and the area constructed under Joint Development Agreement (JDA) will not qualify for exclusion under Item No.5 of Schedule III of the CGST/TNGST Act, which deals with "sale of land".

The applicant, Sripriya Constructions Private Limited had entered into a JDA with a landowner for a residential project. Under the terms of the JDA, the applicant was permitted for the construction of a built up area comprising four apartments. In that two flats were to be handed over to the landowner, while the remaining two flats would be retained by the applicant for sale to prospective buyers.

The Registration Department of the Government of Tamil Nadu, through Circular No. 45438/L1/2023 dated 14.12.2023, introduced a system of composite valuation for “first sale category” flats that is where both the value of land and the building are combined for the valuation of the stamp duty and registration fees.

The applicant approached the AAR to seek a clarification whether the execution of sale deed by the landowner for the UDS area would be sufficient ground to claim exclusion under Item No.5 of Schedule III.

The AAR noted that the composite valuation system introduced by the Tamil Nadu government was for the purpose of stamp duty and registration fee calculation and has no connection to GST.

The AAR clarified that GST law and the registration Acts and rules are two different statutes which are not comparable and the composite value of UDS and constructed residential units adopted for assessing the amount of stamp duty and registration shall not entitle the applicant to claim exclusion from the taxability under GST.

The bench comprising Balakrishna R (Central Member) and B Suseel Kumar ( State Member) observed that, in a composite contract where consideration is not separated, the liability is on the entire transaction value. Even if the entire property is registered under a single agreement without separate identification of land and construction costs, GST would still apply.

The AAR ruled that the claim of exclusion as sale of land for the Sale Deed as per the Joint Venture Development Agreement does not fall under Item No.5 of Schedule III of the CGST Act / TNGST Act.

The applicant was represented by V. Vijay Anand.

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