Gst on joint development of property

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Ranganathan Gowrishankar (Querist)
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31 July 2018 WE ARE THE BUILDER ENTERED IN TO JV WITH THE OWNER OF A PROPERTY AND WE HAVE GIVEN 2 FLATS FOR THEM AND 4 FLATS FOR US.THE OWNER HAS GIVEN POWER FOR THE UDS OF 4 FLATS TO US.
WHAT IS THE GST IMPLICATION FOR THE BUILDER AND THE OWNER.SINCE THERE IS NO COMPLETION CERTIFICATE FOR THIS TYPE OF PROJECT IF WE PRODUCE THE TAX ASSESMENT AND ELECTRICITY BILL WILL IT BE TAKEN AS PROJECT COMPLETED SO NO GST. WHAT IF WE RECEIVE THE ADVANCE BUT NOT REGISTERED THE UDS AND REGISTER THE UDS AFTER GETTING THE TAX ASSESSED WILL IT NOT COVER GST? IS OWNER IS ALSO HAS TO PAY GST EVEN IF HE RETAINS THE FLAT FOR HIS OWN USE.
GOWRISHAKAR

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
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31 July 2018 Builder is liable to levy GST from both the owned and other flat buyers( if received any payment prior to completion) . Regarding completion certificate, obtain it from an architect/ chartered Engineer

Nilesh

Nilesh (Expert)
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06 August 2018 Sir your query is quite complex in the nature - even many experts have divergent views on said topic and for the same one need to see agreement entered between parties

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 The GST implications for joint development agreements (JDAs) involving property can be complex. Here’s a detailed analysis based on your scenario:

### 1. **GST on Joint Development Agreements (JDAs)**

**Nature of the Transaction:**
- **Joint Development Agreement (JDA):** In a JDA, the owner of the land provides the land to the builder for construction, and the builder, in return, provides a portion of the developed property (flats) to the owner. This arrangement can trigger GST implications for both the builder and the owner.

### 2. **GST Implications for the Builder**

**Supply of Service:**
- **Construction Services:** The builder is providing construction services to the owner. This transaction is considered a supply of service under GST.
- **GST on Construction Services:** GST at the rate of **18%** is applicable on the construction services provided by the builder. This is typically charged on the total consideration for the construction services.

**Valuation of Service:**
- **Valuation:** GST is payable on the value of the construction service provided. If the builder is providing a certain number of flats to the owner as part of the consideration, the GST is calculated on the value of the construction service provided, which includes the value of the flats transferred.

**Completion Certificate:**
- **Completion Certificate:** The absence of a completion certificate does not necessarily impact the GST liability. GST is payable based on the construction services provided. However, having a completion certificate or other documentation might be helpful in demonstrating the completion of the project.

**Advance Payments:**
- **Advance and GST:** GST is payable on advances received for construction services. If you receive advances before the completion of the project, you must charge GST on those advances.

**Registration of UDS (Undivided Share):**
- **Timing of GST:** The registration of UDS or the issuance of the completion certificate does not impact the GST liability on the construction services. GST is applicable when the service is provided, not necessarily when the UDS is registered.

### 3. **GST Implications for the Property Owner**

**Consideration for Transfer:**
- **Consideration:** The owner of the property is receiving flats as consideration for providing the land. This is treated as a supply of property under GST.
- **GST on Flats Received:** The owner is deemed to be receiving these flats as a supply of goods. The value of the flats is considered for GST purposes. The owner’s liability depends on whether the flats are considered to be for personal use or for further supply.

**Personal Use:**
- **Personal Use:** If the owner retains the flats for personal use and not for further supply or commercial purposes, there may be no GST liability on the receipt of these flats. However, this needs to be verified based on the specifics of the transaction and whether it qualifies as a supply.

**Tax Assessment and Electricity Bills:**
- **Documentation:** Producing tax assessments and electricity bills can help establish the completion of the project but does not negate the GST liability. GST is determined by the service provided and the consideration received.

### 4. **General Considerations**

**GST Registration:**
- **Compliance:** Ensure compliance with GST registration requirements for both the builder and the owner, based on their roles in the JDA and the nature of their transactions.

**Consultation:**
- **Professional Advice:** Given the complexities involved in property development and joint development agreements, consulting a GST professional or tax advisor is advisable to ensure accurate compliance and handling of GST obligations.

### Summary

1. **GST for Builder:** The builder needs to charge GST on construction services provided to the owner at the rate of 18%. GST applies to both advances and final payments. Registration of UDS or completion certificates does not alter the GST liability.

2. **GST for Owner:** The owner may have GST implications based on whether they use the flats for personal purposes or further supply. GST on flats received should be assessed based on the nature of the supply and use.

3. **Documentation:** Tax assessments and electricity bills help in project documentation but do not affect GST liability.

4. **Consult Experts:** For precise advice and to address any specific scenarios, consulting a GST professional is recommended.

This detailed approach should help clarify the GST implications for both parties involved in a joint development agreement.