In re Royal Builders & Developers (GST AAR Karnataka)
Summary: The Karnataka Authority for Advance Ruling, in In re Royal Builders & Developers, Order No. KAR.ADRG/48/2026 dated 15 October 2026, considered whether a developer undertaking a residential plotted-layout project under a Joint Development Agreement could obtain an advance ruling on its invoicing procedure and whether eligible input tax credit could be utilised against GST on development services supplied to landowners. The Authority declined to rule on invoicing procedure but allowed utilisation of eligible input tax credit, subject to statutory conditions.
The applicant, a partnership firm, entered into a Joint Development Agreement with landowners for development of plots at Yelawala Village, Mysuru District. It undertook to develop infrastructure and amenities, secure statutory approvals and bear development expenditure, with completed plots to be divided between the developer and landowners in the agreed proportions. The original application raised seven questions concerning taxability, rates, activities, invoicing, non-payment, credit and sale of developed plots. By email dated 30 July 2026, the applicant restricted its request to invoicing and input tax credit.
On invoicing, the applicant sought clarity on whether invoices should cover only development activities attributable to the landowners’ share and how invoice value and extent should be determined. The Authority distinguished determination of value of supply under Section 15 from procedural guidance on raising invoices. Since Section 97(2) specifies the permissible subjects of an advance ruling and does not empower the Authority to issue administrative advice on invoicing methodology, documentation or accounting, the invoicing question was held not maintainable.
On input tax credit, the Authority observed that the applicant was making taxable outward supplies of development services to landowners under the forward-charge mechanism. Under Section 16 of the CGST Act, a registered person may avail credit for eligible business inputs, subject to prescribed conditions; Section 49 permits utilisation of electronic credit ledger balances towards output tax, while Section 17 imposes relevant restrictions. The applicant could therefore use eligible input tax credit to discharge GST on those taxable development services.
The Authority further held that eligible credit does not require reversal merely because it is utilised against the development-service liability. Any ineligible input tax credit must, however, be reversed in accordance with the CGST Act and Rules. The ruling did not determine the specific invoice amount or prescribe the procedure for raising invoices, and the applicant’s other original questions were not decided.
FULL TEXT OF THE ORDER OF KARNATAKA AUTHORITY FOR ADVANCE RULING
M/s Royal Builders & Developers, (herein after referred to as ‘the Applicant’), #51, Sajjan Rao Road, Sajjan Rao Circle, V V Puram, Bengaluru, Bengaluru Urban, Karnataka, 560004, having GSTIN 29AANFR4816N 1ZF, have filed an application for Advance Ruling under Section 97 of CGST/KGST Act, 2017 read with Rule 104 of CGST/KGST Rules.
2. The Applicant is a partnership firm engaged in the business of as constr ition and development. The Applicant entered into a Joint Development Builders & Developers Page 1 of 11 Agreement (hereinafter referred to as the “JDA”) with the landowner/landlord for the development of plots situated at Yelawala Village, Yelawala Hobli, Mysuru District, Karnataka.
3.1 In view of the above, the applicant has sought advance ruling in respect of the following questions:
i. Taxability of Development Activities: The Applicant seeks clarification on whether the development activities carried out on behalf of the landowner’s share are subject to tax under relevant provisions.
ii. Applicable Tax Rate and Invoicing: If tax is applicable, the Applicant requests guidance on the appropriate tax rate and whether invoices should be raised solely for the landowner’s share or for the entire project, encompassing both the landowmer’s and the butider’s shares.
iii. Identification of Taxable Development Activities. The Applicant seeks clarification on which specific development activities listed in the JDA, such. as obtaining approvals, preparing plans, and completing infrastructure works, are to be considered for taxation purposes.
iv. Invoicing Procedure: Clarity is sought on the process of invoicing the landowner for development works, including the determination of invoiced amounts and the extent of invoicing.
v. Non-payment of Invoices: In the event that the landowner falls to remit the invoiced amount, including taxes, the Applicant seeks guidance on how to appropriately account for such invoices in its financial records.
vi. Utilization of Input Credits: The Applicant inquires whether input credits can be utilized to offset invoices raised on the landowner for development activities. If input credits cannot be utilized, should they be reversed at time of filing GSTR1 and GSTR 3B, or by the end of the year, specifically by November 30 of the subsequent year?
vii. Taxability of Sale of Developed Plots: Finally, clarification is requested on. whether the sale of developed plots and advances received against the sale of plots are liable to tax under the relevant tax laws.
3.2 However, the Applicant, vide e-mail dated 30.07.2026, submitted that, considering the discussions held during the course of the personal hearing and the present status of the project, several of the questions originally raised in the application have either attained finality or have become academic in nature.
3.3 Accordingly, the Applicant requested that the scope of the present Advance Ruling application be confined to the following questions only:
Questions No.4 Invoicing procedure: clarity on the process of invoicing the landlord for development activities, including the determination of the invoiced amount and the extent of such invoicing.
Questions No.6 utilization of Input tax Credit: whether the applicant is entitled to avail and utilized eligible input tax credit against the GST liability arising on the invoices issued in respect of the development activities attributable to the landowner’s share and, if not, the manner and timing of any reversal, if required, under the provisions of the GST law.
4. Admissibility of The Application: The Applicant, under Column 13 of Form GST ARA-O1, has selected the categories of issues as “Classification of any goods or services or both” and “Determination of the liability to pay tax on the goods or services or both.” Subsequently, vide e-mail dated 30.07.2026, the Applicant requested that the scope of the present application be confined to the issues relating to the invoicing procedure and utilisation of Input Tax Credit. On examination, it appears that the questions, as subsequently confined by the ‘Applicant, pertain to the admissibility of Input Tax Credit and, therefore, fall within the ambit of Section 97(2)(d) of the CGST/KGST Act, 2017. Accordingly, the application is held to be admissible under the aforesaid provisions of the Act.
5.1 Brief Facts of the Case: – The Applicant is a registered developer who has entered into a Joint Development Agreement (JDA) with the landowners for the development of a residential layout along with the necessary infrastructure and amenities. Upon completion of the development, the developed plots are to be allocated between the landowners and the Applicant in the agreed proportion. As per the terms of the JDA, the Applicant is responsible for undertaking and bearing the entire cost of the development activities.
5.2 Further, the Applicant has been entrusted with the responsibility of undertaking the development of the project, obtaining all requisite statutory approvals, executing the necessary development works, and ensuring compliance with the regulations prescribed by the Mysore Urban Development Authority and other concerned Government Departments. The responsibility for preparing the plans and obtaining all necessary licences, approvals and sanctioned plans, as well as the expenses incurred in this regard, shall be borne by the Developer.
6.1 Applicant’s Interpretation of Law: – The Applicant submits as follows:
a) In respect of Question No. 4, the Applicant submits that, if the development activities undertaken by the Applicant in respect of the landowner’s share are held to be taxable under the GST law, the Applicant would be required to comply with the invoicing provisions prescribed under the CGST Act, 2017 and the Rules made thereunder.
b) The Applicant submits that the invoice, if required to be issued, should be restricted to the development activities attributable to the landowner’s share and should not extend to the Applicant’s own share of the developed plots. The taxable value of such supply, if liable to GST, should be ‘determined in accordance with the applicable valuation provisions under the GST law.
c) Accordingly, the Applicant contends that the extent of invoicing should be confined only to the development activities attributable to the landowner’s share under the Joint Development Agreement.
6.2 a) In respect of Question No. 6, the Applicant submits that, if the b) 4) development activities attributable to the landowner’s share are held to be taxable and GST is payable thereon, the Applicant would be entitled to avail and utilise the eligible input tax credit on the goods and services used in undertaking such development activities, subject to the provisions of Sections 16 and 17 of the CGST Act, 2017 and the Rules made thereunder.
b) It is further submitted that the mere fact that the landowner is unregistered or does not reimburse the invoiced amount, including the tax component, should not, by itself, affect the eligibility to avail or utilise the otherwise admissible input tax credit.
c) Accordingly, the Applicant submits that reversal of input tax credit would arise only to the extent specifically mandated under the provisions of the GST law. In the absence of any such statutory requirement, the eligible input tax credit attributable to the development activities relating to the landowner’s share should remain available for utilisation towards the corresponding output tax liability.
d) The Applicant further submits that, where reversal of input tax credit is required under the provisions of the GST law, the same should be undertaken strictly in accordance with the statutory mechanism prescribed under the CGST Act, 2017 and the Rules made thereunder.
e) Accordingly, it is submitted that, in the absence of any specific statutory provision requiring month-to-month reversal of input tax credit, no such reversal can be insisted upon merely at the time of furnishing the monthly rns. Any reversal or adjustment, wherever applicable, should be carried out only in the manner and within the timelines prescribed under the GST law.
7.1 PERSONAL HEARING PROCEEDINGS HELD ON 18.06.2026
Shri P. Parimal Prasad and Shri K.V. Balasubramanyam, Chartered Accountant, the authorised representatives (hereinafter referred to as “the AR”) of the Applicant, appeared for the personal hearing held on 18.06.2026 before this Authority. During the course of the hearing, the AR reiterated the facts of the case and the submissions made in the Advance Ruling application. The AR explained the nature of the project undertaken pursuant to the Joint Development Agreement (JDA) and sought clarification primarily on the invoicing requirements in respect of the development activities carried out for the landowners.
7.2 The AR specifically requested this Authorities to clarify only two questions: –
(1) Whether the Applicant is required to issue invoices to the landowners for the development works, the manner of determining the value of such invoices, and the extent to which invoices are required to be raised for the development activities undertaken for the landowners’ share.
(2) The AR further sought clarification as to whether the input tax credit available to the Applicant can be utilised towards the GST liability arising on such invoices. In the event that such input tax credit is not admissible, the AR requested clarification on whether the same is required to be reversed on a monthly basis while filing the returns in Form GSTR-1 and Form GSTR-3B or at the end of the financial year, i.e., on or before 30th November of the succeeding financial year, in accordance with the provisions of the CGST Act.
7.3 The AR further submitted that the remaining questions raised in the x plication have substantially been settled by subsequent notifications and judieiel pronouncements and, therefore, did not press those issues for detailed consideration during the personal hearing.
FINDINGS & DISCUSSION:
8. At the outset we would like to make it clear that the provisions of the CGST Act, 2017 and the KGST Act, 2017 are in pari materia and have the same Provisions in like matters and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act, 2017 would also mean reference to the corresponding similar provisions in the KGST Act, 2017.
9. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant, relevant facts, and the arguments made by the applicant and the submissions made by their learned representative during the time of hearing.
10. The Applicant has rephrased the questions and sought a ruling on:-
i. the procedure for invoicing the landowners in respect of the development activities undertaken under the Joint Development Agreement (JDA), including the determination of the value and extent of such invoicing, and;
ii. Whether the Applicant is entitled to avail and utilise the eligible input tax credit towards payment of GST on such development services and, if not, the manner and timing of reversal of input tax credit.
11.1 Issue No. (i) – Invoicing of Development Services
i. The applicant has sought a ruling regarding the procedure of raising invoices on the landowner for the construction services provided by the developer under the Joint Development Agreement, including the determination of the invoice value and the extent to which invoices are required to be raised. The applicant has sought a ruling regarding the procedure of raising invoices on the landowner for the construction services fal Builders & Developers Page 7 of 11 including the determination of the invoice value and the extent to which invoices are required to be raised
ii. At the outset, it is pertinent to examine whether the aforesaid question falls within the ambit of Section 97(2) of the Central Goods and Services Tax Act, 2017, which exhaustively specifies the questions on which an advance ruling can be sought. The matters specified therein are:
a) classification of any goods or services or both;
b) applicability of a notification issued under the provisions of the Act; c) determination of time and value of supply of goods or services or both;
d) admissibility of input tax credit;
e) determination of the liability to pay tax on any goods or services or both; f) whether the applicant is required to be registered;
g) whether any particular act or thing amounts to or results in a supply of goods or services or both.
iii. The present question does not seek a determination of the value of supply under Section 15 of the Act or the applicable valuation rules. Instead, it seeks clarification regarding the procedural aspects of invoicing, namely the manner in which invoices are to be issued, the amount to be reflected in the invoice, and the extent of invoicing to be undertaken between the developer and the landowner.
iv. The Advance Ruling Authority is constituted to decide only the specific questions enumerated under Section 97(2) of the CGST Act, 2017. It is not empowered to issue advisory opinions or administrative guidance on accounting practices, documentation requirements, invoicing methodology, or the mechanics of compliance under the GST law.
v. Although the applicant has referred to the amount to be mentioned in the invoice, the substance of the question pertains to the procedure of invoicing and not to the statutory determination of the value of supply under Section 15 read with the applicable valuation provisions. Similarly, the question does not seek determination of tax liability, classification, applicability of any notification, admissibility of input tax credit, registration requirement, or whether an activity constitutes a supply.
vi. Accordingly, the question is outside the scope of Section 97(2) of the CGST Act, 2017 and is therefore not maintainable before the Advance Ruling Authority. –
vii. It is well settled that the jurisdiction of the Advance Ruling Authority is confined strictly to the matters enumerated under Section 97(2), and the Authority cannot render rulings on procedural or administrative issues which are not covered by the said provision.
11.2 Issue No. (ii) – Availment, Utilisation and Reversal of Input Tax Credit
i. We observe that the Applicant is making a taxable outward supply of development services to the landowners and is liable to discharge GST on such supply under the forward charge mechanism.
ii. Section 16 of the CGST Act, 2017 entitles a registered person to avail input tax credit on goods or services used or intended to be used in the course or furtherance of business, subject to the conditions and restrictions prescribed therein. Further, Section 49 of the CGST Act permits utilisation of the balance available in the electronic credit ledger towards payment of output tax, subject to prescribed conditions.
iii. Accordingly, the Applicant is entitled to avail and utilise the eligible input tax credit towards discharge of the GST liability on the taxable outward supply of development services, subject to fulfilment of the conditions prescribed under Section 16 and restriction contained in Section 17.
iv. Since the eligible input tax credit is available for utilisation towards payment of output tax, the question of reversal of such eligible credit does Builders & Developers Page 9 of 1E not arise. However, any ineligible input tax credit shall be reversed in accordance with the provisions of the CGST Act, 2017 and the Rules made thereunder.
12. In view of the foregoing, we pass the following.
RULING
i. Question 1: Whether the Applicant is required to issue tax invoices to the landowners in respect of the development activities, including the determination of the invoiced amount and the extent of such invoicing?
Answer: The question is not maintainable under Section 97(2) of the CGST Act, 2017, as it seeks clarification regarding the procedural aspects of invoicing and does not fall within any of the specified categories of questions on which an advance ruling can be sought. Accordingly, no ruling can be given on the said question.
ii. Question: Whether the Applicant is entitled to avail and utilise the eligible input tax credit towards payment of GST on such development services and, if not, the manner and timing of reversal of input tax credit?
Answer: The Applicant is entitled to avail and utilise eligible input tax credit towards payment of GST on the taxable outward supply of development services, subject to Sections 16 and 17 of the CGST Act, 2017. No reversal of eligible input tax credit is required. However, any ineligible input tax credit shall be reversed in accordance with the provisions of the CGST Act, 2017 and the Rules made thereunder.
