In re M/s. Sharda Vastu Nirmitee Pvt. Ltd. (GST AAR Maharashtra)
The Authority for Advance Ruling (AAR), Maharashtra examined GST implications in a redevelopment project involving transfer of development rights (TDR) and provision of constructed flats and other benefits to existing society members. The applicant, a real estate developer, had entered into a development agreement in 2016, followed by supplementary agreements in 2021 and 2024, which materially altered the terms relating to allocation of flats, additional area, and benefits to members and the society.
The primary issue was whether GST is payable on flats and amenities provided free of cost to existing members, and on monetary payments such as rent, brokerage, shifting charges, and corpus amounts. The AAR held that such transactions constitute “supply” under Section 7 of the CGST Act, as they involve an exchange of development rights by the society for construction services provided by the developer. Even though flats are given without monetary consideration, they are supplied in return for TDR, thereby qualifying as a taxable barter transaction.
The AAR further held that construction of flats for existing members amounts to supply of services under Schedule II of the CGST Act. Accordingly, GST is payable on such construction services. The authority rejected the applicant’s contention that the original 2016 agreement should govern taxability, observing that the supplementary agreements significantly modified rights and obligations, and therefore, the effective transfer of development rights occurred during the GST regime after 1 April 2019.
