Under this redevelopment schemes, societies undertake redevelopment of existing building owned by them by entering into Development Agreements with Builders. GST rate will be 1% if its cover under affordable housing scheme or else 5% GST rate will be applicable. Further developer has to purchase at least 80% of the value of input and input services from registered suppliers. If value of supplies from registered dealer is less than 80% then Developer has to pay GST @18% on reverse charge (RCM) basis on all such inward supplies for the shortfall amount. Tax rate on Cement purchased from unregistered Person would be 28% and as per new scheme no ITC of the inputs will be allowed as concessional rate of GST is applicable.
1. Whether sale or transfer of TDR is taxable under GST ?
With reference to notification No.4/2019-CT, sale or transfer of TDR is exempt under GST provided there is no units left for sale on date of receipt of occupancy certificate. If any units being unsold on date of receipt of occupancy certificate then GST to be paid by the promoter and 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 unbooked on the date of issuance of completion certificate, or first occupation of the project whichever is earlier, as the case may be, in the following manner:
(a) 18% on Value of DR/TDR/FSI* in proportion to carpet area of such unsold flats to total carpet area of residential flats; or
(b) 1% / 5% of Value of such unsold flats**
whichever is lower.
*Valuation of DR/TDR/FSI/Lease
(i) Outright purchase: value of monetary consideration paid for outright purchase
(ii)Area sharing: value of similar apartments charged by promoter from independent buyers nearest to the date of transfer of DR/TDR/FSI;
(iii) Revenue sharing: monetary consideration paid to the Landowner as revenue share
***Value of unsold flats is deemed as equal to value of similar apartments charged by the promoter nearest to the date of completion certificate or first occupation, whichever is earlier.
2. Tax Implication on Supply of Residential Units By the Developer to the members of the Society
In are development project the Developer gets the development rights from the Society and in turn he gives flats to them. This is a barter of supplies; here there is no consideration in the form of money. However, for the purposes of levy of GST, the value of services has to be quantified. Therefore, the law provides that in such cases the value of construction service i.e. flats supplied to Society, shall be equal to the rate of the flats sold to independent buyers nearest to the date of development agreement.
GST shall be payable by the Developer at the effective rate of 1%/5%, at the time of receipt of completion certification or first occupancy, whichever is earlier.
3. GST Implication on units sold to new member before receiving Occupancy Certificate
GST is applicable @ 1 % or 5% on consideration paid to the builder/developer and it will be normal transaction as happen between normal transaction between Developer and buyer.
4. Tax Implication on units remain unsold as on date of receipt of Occupancy Certificate
if there are any flats which remain un-sold on the date of receipt of completion certification or first occupancy, GST shall be payable at the rate of 18% on the value of TDR proportionate to the carpet area of un-booked flats subject to maximum 1 % / 5% of the value of such un-booked flats.
The liability to pay GST shall arise at the time of receipt of completion certificate or first occupancy, whichever is earlier and payable by the Developer under Reverse Charge Mechanism (RCM) is as under:
For Example : 440 developers is going to redevelop the society 999 Co. Housing Society. and the details are as mentioned below:
|2||Carpet Area of each unit||800 sq.ft|
|3||Total New unit area (30*1000)||30000 sq.ft|
|4||Total area allotted to existing member (20*1000)||20000 sq .ft|
|5||Area to be sold to new members||10000 sq.ft|
Now in the above scenario if out of new available units 4 remain unsold on the date of receipt of occupancy certificate. New unit has been sold @ Rs. 20000 per sq. ft and the consideration is more than 45 lakhs therefore the rate of tax rate applicable is 5 %.
Hence the calculation for GST on TDR under RCM is as follows:
(a) (GST payable on TDR for old units ) * (Area remain unbooked as on cut off date / Total Area)
(b) Value of unbooked units as on date of receipt of OC
whichever is lower.
Therefore GST liability on the above transaction is 20,00,000/-