GST Council in the 34th meeting held on 19th March, 2019 at New Delhi recommended that the supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer shall be exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them. To give effect to the recommendations of the Council, Central Government has issued Notification No. 04/2019 & 05/2019-Central Tax (Rate) on 29-March-2019. The simplified analysis of the said notifications is as below :
| Sr | Major Head | Particulars / Description |
| A | Analysis of Notification No. 04/2019-Central Tax (Rate) on 29-March-2019 | |
| I | Notification No 12/2017 – Central Tax (Rate) | Vide this notification, the Central Government has exempted intra-state supply of notified services from GST. In the said notification, fresh entry 41A & 41B has been added to give effect to the GST Council Recommendations. |
| II | Entry 41A exempting Transfer of TDR | |
| 1 | Exemption of | Service by way of transfer of development rights (herein refer TDR) or Floor Space Index (FSI) (including additional FSI) on or after 1st April, 2019 for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate or after its first occupation whichever is earlier |
| 2 | Value of Supply of Exempted Service | Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter. |
| 3 | Maximum Amount of Exemption | [GST payable on TDR or FSI (including additional FSI) or both for construction of the project] x (carpet area of the residential apartments in the project ÷ Total carpet area of the residential and commercial apartments in the project ) |
| 4 | Reverse Charge on Promoter | Provided that the promoter shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of development rights, or FSI (including additional FSI), or both, as is attributable to the residential apartments, which remain un-booked on the date of issuance of completion certificate, or first occupation of the project, as the case may be, in the specified manner. |
| 5 | Value of Supply under Reverse Charge | [Exempted GST payable on TDR or FSI (including additional FSI) or both for construction of the residential apartments in the project as calculated in above manner] x (carpet area of the residential apartments in the project which remain un- booked on the date of issuance of completion certificate or first occupation / Total Carpet Area of the Residential Apartments in the project) |
| 6 | Maximum Amount of GST Payable under RCM | Provided further that said tax payable under reverse charge shall not exceed 1% of the value in case of affordable residential apartments and 5% of the value in case of residential apartments other than affordable residential apartments remaining un- booked on the date of issuance of completion certificate or first occupation |
| 7 | Time of Supply under RCM | The liability to pay central tax on the said portion of the development rights or FSI, or both, calculated as above, shall arise on the date of completion or first occupation of the project, as the case may be, whichever is earlier. |
| III | Entry 41B exempting Upfront Amount towards Lease etc | |
| 1 | Exemption of | Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate or after its first occupation whichever is earlier |
| 2 | Maximum Amount of Exemption | [GST payable on upfront amount as stated above] x (carpet area of the residential apartments in the project ÷ Total carpet area of the residential and commercial apartments in the project ) |
| 3 | Reverse Charge on Promoter | Provided that the promoter shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of above referred upfront amount, as is attributable to the residential apartments, which remain un-booked on the date of issuance of completion certificate, or first occupation of the project, as the case may be, in the specified manner. |
| 4 | Value of Supply under Reverse Charge | [Exempted GST payable on upfront amount as referred above for construction of the residential apartments in the project as calculated in above manner] x (carpet area of the residential apartments in the project which remain un- booked on the date of issuance of completion certificate or first occupation / Total Carpet Area of the Residential Apartments in the project) |
| 5 | Maximum Amount of GST Payable under RCM | Provided further that said tax payable under reverse charge shall not exceed 1% of the value in case of affordable residential apartments and 5% of the value in case of residential apartments other than affordable residential apartments remaining un- booked on the date of issuance of completion certificate or first occupation |
| 6 | Time of Supply under RCM | The liability to pay central tax on the said portion of the upfront amount, calculated as above, shall arise on the date of completion or first occupation of the project, as the case may be, whichever is earlier. |
| IV | Definition / Meanings : | |
| 1 | Apartment booked before completion meaning | “an apartment booked on or before the date of issuance of completion certificate or first occupation of the project” shall mean an apartment which meets all the following three conditions, namely-
(a) part of supply of construction of the apartment service has time of supply on or before the said date; and (b) consideration equal to at least one instalment has been credited to the bank account of the registered person on or before the said date; and (c) an allotment letter or sale agreement or any other similar document evidencing booking of the apartment has been issued on or before the said date |
| 2 | Value of un-booked apartments | Value of portion of residential or commercial apartments remaining un-booked on the date of issuance of completion certificate or first occupation, as the case may be, shall be deemed to be equal to the value of similar apartments charged by the promoter nearest to the date of issuance of completion certificate or first occupation, as the case may be |
| B | Analysis of Notification No. 05/2019-Central Tax (Rate) on 29-March-2019 | |
| I | Notification No 12/2017 – Central Tax (Rate) | Vide this notification, the Central Government has notified categories of supply of services liable for Reverse Charge u/s 9(3) of the CGST Act . In the said notification, fresh entry 5B & 5C has been added to give effect to the GST Council Recommendations. |
| II | Entry 5B levying Reverse Charge on supply of TDR | |
| 1 | Category of Service liable for Reverse Charge | Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter. |
| 2 | Supplier of Service | Any person |
| 3 | Recipient of Service | Promoter |
| III | Entry 5C levying Reverse Charge on supply of TDR | |
| 1 | Category of Service liable for Reverse Charge | Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter. |
| 2 | Supplier of Service | Any person |
| 3 | Recipient of Service | Promoter |
| IV | Definition / Meanings : | |
| 1 | Promoter meaning | “promoter” means,—
(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building (ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or (iii) any development authority constructing buildings on lands owned by them or placed at their disposal by the Government; (iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or (v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public. |
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