The Maharashtra Authority for Advance Ruling (AAR) has held that Goods and Services Tax leviable on sale of Transferable Development Right (TDR) or Floor Space Index (FSI) received for construction of commercial apartments.
Facts of the case
The Applicant, Mr Vilas Chandanmal Gandhi, was an owner of the land situated within the limits of PMC and wanted to develop the land jointly in collaboration with M/s. Amar Builders and Developers and share the profits through the distribution of sale proceeds after the development of the land by way of construction of residential/ commercial projects.
Applicant assigned/ transferred the development rights inland to the Developer and the said assignment/ transfer of rights in land was for the purpose of construction of residential/ commercial project on the land also agreed to pay consideration in the form of 45% of the sale proceeds of the developed project.
Also, the developer had given Rs. 3,60,00,000/- (Rs. Three Crores Sixty Lakhs only) to the Applicant as a security deposit to be refunded within a month after completion of the project on the underlying land,
Interpretation of law:
The Applicant and the developer were enjoying jointly, in the land on which there was a reservation, in light of Draft Development Plan for Pune city sanctioned by the Municipal Corporation of Pune City (PMC).
Since the applicant and the developer realized that vacating/ removing reservations may possible, they decided to surrender their rights in the said land. PMC gave them R’s/ Additional FSI, as consideration for surrendering the joint rights in land to PMC in terms of Development Control Regulations (DCR). Applicant and the Developer entered into a supplementary agreement which included the following clauses:
- The TDR/ Additional FSI to be obtained would be shared between the Applicant and Developer in the ratio of 73:27;
- The proportionate TDR/ Additional FSI would be transferred by the Applicant in favour of the Developer or the Applicant would transfer the proportionate sale proceeds (out of the sale of TDR/ Additional FSI) to the Developer.
The Authority for Advance Ruling (AAR) bench comprising of Additional Commissioner, Vineetha Sekhar and Joint Commissioner, A A Chahure delivered the order based on an application filed by Vilas Chandhanmal Gandhi.
The Authority for Advance Ruling (AAR) observed that Goods and Services Tax(GST) on TDR or FSI (including additional FSI) is payable at the rate of 18% (9%+9%) with ITC under serial number 16.
The Authority further observed that there is no exemption on TDR or FSI(including additional FSI) for construction of commercial apartments and Goods and Services Tax(GST)shall be payable on TDR or FSI(including additional FSI) or both used in respect of (1) carpet area of commercial apartment and (2) unbooked residential apartments as on the date of issuance of Completion Certificate or first occupation of the project for the purpose of formula.
Also, refer other orders of AAR here- https://capage.in/aar-ruling-on-gst-rate-applicable-for-supply-of-foods-or-drinks-in-restaurant-for-consumption-within-or-away/