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Development agreement and GST

B.P.Mundra > Articles > GST > Development agreement and GST

admin November 16, 2019

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Development agreement and GST


When a developer enters into a development agreement with a Landowner, GST would become payable by the Landowner when the developer transfers possession or the rights in the constructed complex, building or civil structure, to the Landowner by entering into a conveyance deed or allotment letter.
Hence, when the Landowner receives a constructed property from the Developer in exchange for providing land, the Landowner would become liable for payment of GST. 
34th GST Council Meeting was held via video conference on 19th March 2019 (Tuesday)
Builders of existing housing projects that are completing construction by 31st March 2019 get to choose either of the two alternatives:
Alternative 1: Choose the old rate of 12% (8% for affordable housing) and charge this GST Rate in the invoices raised. Further, input tax credit benefit is available and can be passed on to the buyer.
Alternative 2: Choose to bear GST tax at the rate of 5% (1% for affordable housing as defined by GST law). The benefit of the input tax credit(ITC) is not available to the builder for procurements used in construction.

Those who choose the 2nd alternative must reverse the accumulated ITC on their closing stock of under-construction properties in a proportion laid down in rules (to be notified) within six months.
GST Council slashed the rate for affordable under construction housing from 8% to 1% and for non-affordable housing segment from 12% to 5%.  These rate cuts will be applicable provided no input tax credit is availed by the builders or developers.

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