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GST on consideration of Development RIghts

Sanjay Dugar (Chartered Accountant) (206 Points)

06 June 2020

A developer and Landlord has entered into a Joint Development Agreement before 1.4.2019. After issue of notification no 4/2019 dt 29.02.2019 the developer decided not to opt for the same and continue to charge GST @ 12% on sale of its apartments and claim ITC on materials used.
My query is when the developer now pays consideration for development rights to the Landlord in form of constructed flat / cash then the GST on development rights shall now be charged on RCM basis or Landlord has to collect GST from the developer. Pls reply with necessary Notification No, AAR, section etc
Thanks

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1 Replies

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 07 June 2020

The Developer need to Reverse the ITC on Flats given to Landlord in lieu of development rights .

Sale of flats after issuance
of completion certificate without payment of GST in terms of
clause 5 of schedule-III to CGST Act are exempt supplies , & in term of Section 17(2) the amount of credit shall be restricted to so much of the input tax as is attributable to the said Taxable supplies.

So any flats sold/booked after date issuance of completion certificate , for Developer it Exempted supply so the ITC attributable in proportion to Exempted supply need to be Reverse.

(Kindly refer Notification 4/2018 IGST (r))