The Telangana Authority for Advance Ruling ( AAR ) has held that Transfer of development rights by the landowner to the developer is considered as supply hence shall be liable to Pay GST on transfer of completion of construction.
The applicant, Maddi Seetha Devi, is a registered taxpayer and a landowner and has entered into a development agreement with M/s. PHL and entrusted the land to M/s. PHL by way of a joint development agreement in the year 2016. M/s. PHL will hand over 27% of the developed property to the applicant. The applicant is desirous of clarification regarding liability of transfer of development rights and time of supply under GST. Hence the applicant has sought an advance ruling for this clarification.
Y Sreenivasa Reddy and C.V. Narsimham representing the applicant contended that, the applicant alienated the development right to the builder developer before the enactment of the Goods And Service Act 2017. They have supplied development rights to the builder and in exchange received construction services from the builder.
After the discussion they content that The GST structure on real estate services has been greatly altered from 01.04.2019 through Notification No. 03/2019 and Notification No. 04/2019 dated: 29.03.2019.As per the following notificationapplicant who is the developer-promoter shall pay CGST & SGST on the supply of construction of apartment to the land owner promoter.
Further if the land owner promoter further supplies such apartments to the buyers before the issuance of completion certificate he shall be liable to pay CGST & SGST on such supplies. Hence Transfer of development rights by the landowner to the developer is consideration received by such developer for supply of construction service. They are also liable to pay GST.
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