Joint Development Agreement (JDA) It is an arrangement between the Land owner and the Builder/Developer, where the Land owner contributes his land and the Developer takes the full responsibility of obtaining approvals, construction, launching and marketing the project with the help of financial resources.
We can find 3 types of transactions in every JDA
1. Transfer of Development Rights by Land Owner to Developer or Builder against consideration, wholly or partly in the form of construction service of complex, building or civil structure (Notification No 4/2018 Central Tax (Rate) & Notification No 3/2019 Central Tax (Rate))
2. Transfer of Construction services by Developer or Building to Land Owner against consideration, wholly or partly, in the form of transfer of development rights (Notification No 4/2018 Central Tax (Rate) & Notification No 3/2019 Central Tax (Rate)) And
3. Normal sale of Developed area by Land owner and Developer.
Taxability above transactions have to be seen in the light of on or before and after 31-03-2019. Because there is a change in taxability of Residential Real Estate Project on or after 01-04-2019.
1. Transfer of Development Rights by Land Owner to Developer or Builder:
a. Joint Development Agreement (Residential Real Estate Project) Entered before 31-03-2019:
i. In case of Joint Development Agreement entered before 31-03-2019, for the transfer of development rights by land owner, landowner needs to pay.
ii. Value of Supply: value has to be determined as per *Rule 27 of the Central Goods and services Tax Rules, 2017 read with section 15 of CGST Act, 2017.
iii. Time of Supply: Date of transfer of possession or right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).
iv. Rate of GST: 18% on value of supply specified in point no ii
b. Joint Development Agreement (Residential Real Estate Project) Entered on or after 01-04-2019:
i. In case of Joint Development Agreement entered on or after 01-04-2019, for the transfer of development rights by landowner, GST need to be discharged by Developer or Builder under Reverse Charge Mechanism.
ii. Value of Supply: The Developer shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of development rights 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.
Formula: GST Payable on development rights * Carpet area of apartments which remain un-booked as on date of completion certificate / Total area of the apartment
Further tax payable shall not exceed 0.5% or 2.5% as the case may be of the value of remaining un-booked on the date of completion certificate or first occupation.
That is in the first case we have to consider nearest market value on date of development agreement and in the second case consider nearest market value on date of completion certificate.
iii. Time of Supply: 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.
iv. Rate of GST: 1% or 5% affordable or non-affordable respectively on value of supply specified in point no ii
c. Joint Development Agreement (Commercial Real Estate Project) Entered both before or after 31-03-2019:
i. In case of Joint Development Agreement for commercial projects entered before or after 31-03-2019, for the transfer of development rights by land owner, landowner needs to pay GST Liability.
ii. Value of Supply: value has to be determined as per *Rule 27 of the Central Goods and services Tax Rules, 2017 read with section 15 of CGST Act, 2017.
iii. Time of Supply: Date of transfer of possession or right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).
iv. Rate of GST: 18% on value of supply specified in point no ii
2. Transfer of Construction services by Developer or Building to Land Owner:
a. Joint Development Agreement (Residential Real Estate Project) Entered before 31-03-2019:
i. Construction services provided by developer or builder to landowner, this also a supply under GST as the consideration is in the form of development rights. Developer needs pay GST on this transaction
ii. Value of Supply: value has to be determined as per *Rule 27 of the Central Goods and services Tax Rules, 2017 read with section 15 of CGST Act, 2017.
iii. Time of Supply: Date of transfer of possession or right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).
iv. Rate of GST: 12% on value of supply specified in point no ii (18% less 1/3rd deduction of value for land) if developer opt to pay under old scheme, else 1.5% or 7.5% affordable or non-affordable respectively on value of supply specified in point no ii (1.5% or 7.5% less 1/3rd deduction of value for land).
b. Joint Development Agreement (Residential Real Estate Project) Entered on or after 01-04-2019:
i. Construction services provided by developer or builder to landowner, this also a supply under GST as the consideration is in the form of development rights. Developer needs pay GST on this transaction.
ii. Value of Supply: value of service has to be determined as per amount changed to independent buyer nearest to Joint Development Agreement.
iii. Time of Supply: 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.
iv. Rate of GST: 1.5% or 7.5% affordable or non-affordable respectively on value of supply specified in point no ii (1.5% or 7.5% less 1/3rd deduction of value for land).
c. Joint Development Agreement (Commercial Real Estate Project) Entered Before or after 31-03-2019:
i. Construction services provided by developer or builder to landowner, this also a supply under GST as the consideration is in the form of development rights. Developer needs pay GST on this transaction.
ii. Value of Supply:
If date of JDA is before 31-03-2019: value has to be determined as per *Rule 27 of the Central Goods and services Tax Rules, 2017 read with section 15 of CGST Act, 2017.
If date of JDA is after 31-03-2019: value of service has to be determined as per amount changed to independent buyers nearest to Joint Development Agreement.
iii. Time of Supply:
If date of JDA is before 31-03-2019: Date of transfer of possession or right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).
If date of JDA is after 31-03-2019: 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.
iv. Rate of GST: 12% on value supply specified in point no ii (18% less 1/3rd deduction of value for land)
3. Normal sale of Developed area by Land owner and Developer:
This transaction is very normal to either land owner or developer.
Value of Supply: Transaction value as per section 15 of Central Goods and Services Tax Act, 2017.
Time of Supply: As per section 13 of Central Goods and Services Tax Act, 2017, date of invoice or date of payment whichever is earlier.
Rate of Tax:
a. Project commenced before 31-03-2019: 12% on value of supply (18% less 1/3rd deduction of value for land).
b. Project commenced after 31-03-2019: if he opts to pay under new scheme 1.5% or 7.5% affordable or non-affordable respectively on value supply. Else, 12% on value of supply (18% less 1/3rd deduction of value for land).
*Rule 27 of Central Goods and Services Tax Rules, 2017 read with section 15 of Central Goods and Services Tax Act, 2017:
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,-
a) be the open market value of such supply;
b) if the open market value is not available under clause (a), be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply;
c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;
d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order.
This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be uses as legal opinion and not to be used for rendering any professional advice.
Author Bio
In case cash consideration i.e.( in Bank through NEFT, RTGS, etc.) is received from the developer to the land owner at the beginning of the project,
1. Whether GST is liable on such cash consideration.
2. If liable at what rate and
3. When it should be paid at time of receipt or at time of completion
Sir if the JDA is entered before 31/03/2019 & project is completed after 31/03/2019 we have to consider date of JD agreement to decide who will pay GST?
landowner needs to pay the gst and is developer liable to claim ITC of the same?
Please explain the ITC relates to Joint development agreement.
we have an area sharing jda with builder. do we have to pay gst on our share of flats and on what value
Great Job Prasanth . Very well written .
How about GST on rent, or other compensation paid to landowners during the period of construction. I could not find any material regarding the same. Request you to throw some light on that. Thanks
Rent or other compensation paid in a jda by the developer to the landowner, to my mind is not liable to gst. The reasoning is that its not in his line of business/activity for furtherance of business. Developer rents out a place generally or the rent is billed to him. If consideration is paid for covering rent, it will be booked as a project expense!
for the developer
very good and informative content, Thank You
Dear Sir Needs clarification on Collaboration of Building of Flats by Builder. Assume a plot of 300 Sq Yards to be handed over to developer by land owner. Developer builds 4 floors on the plot and in return takes one floor to sell in the market. Assuming Market price of Sale is 1 Cr per floor. Who is liable to pay Tax and how much. Thanks
Collaboration agreement how to calculate owners Share GST
Very knowledgeable articles, Thank you..
In a Joint Development activity the land is divided between 3 in the ratio of 35% x2 and 30%x1. Is GST applicable for the owner portions of the flat constructed by the builder and the as consideration which is retained by the owners.Is UDS is also taxable for the Owner portions.
yes it is taxable. If it is commercial project and residential (JDA entered before 01-04-20219), Land owner need to pay GST on transfer of development rights and intern developer will GST on construction services provided to land owner. And if it is residential project (JDA entered after 31-03-2019) treatment will be different.
Sir,
A good contribution.
And you have not only “consolidated”, but you have presented logically and properly.
How many can understand this from mere “Act & Rules”? And by the way, it is not from Act and Rules but from notifications. Surprised to see how people pass such comments.
Thank you for your valuable feedback and
Way of reading differs from person to person and that person understood in that way.
70/30 agreement with builder. Agreement includes get chargeble to landlord. Selling price is 10000 per Sqft. No other advance payment recd from builder. Want to know basis of gist calculation on my 70 share.
Required some additional information w.r.t residential or commercial, date of JDA etc. Please contact me on prashanth@msyassociates.in or on call 9010918363.
It is just a copy paste from the Rule/Act Book. There is nothing new to learn..
Yes, I have consolidated all the provisions relating to Joint development agreements with some explanations and thanks for your comment.
Well written article.
Thank you aditya garu