Previously we had discussed the new GST Rate in the real estate sector. And in this article, we will cover about TDR supply by the landlord and faq on real estate GST.
A developer or promoter is the person who develops a plot into apartments and promotes it for sale.
A landowner is a person who transfers the plot or his development rights to a developer. So as to get properly built an apartment on such a plot and to further independently sell such apartments to the buyers.
From the above statements, we can conclude that the landlord transfers his development rights to a developer. And for such transfer, he gets either the constructed units or money or both. Hence, these rights are commonly known as or TDR full form in GST is Transferable Development Right (TDR). In this article, you'll also know about GST on sale of TDR.
TDR is not taxable under GST until or unless the developments rights are transferred to construct residential units and that is GST applicable on TDR purchase on commercial building. However, there is a catch that these units shall be sold prior to the completion certificate date or first occupancy. In other words, TDR will be taxable if the units are sold after receiving a completion certificate or first occupancy. Next, you'll know about GST on TDR and FSI sale and taxability of TDR under GST.
TDR is not taxable under GST on TDR on residential property where the result from such transfer is a residential unit. On the contrary, the TDR service will be taxable for construction of commercial units.
GST will be applicable on supply of TDR when-
There are some residential units left as an inventory after the receiving completion certificate.
Let us understand this with an example:
In such case, GST will be applicable to supply of TDR service to an extent of 20 residential units and 40 commercial units.
The Value of supply of goods against consideration will be equivalent to the value charged from the buyer, nearest to the date of TDR.
The GST on transfer of development rights service falls under the reverse charge mechanism (RCM). In simple words, the developer to whom the TDR GST has been supplied will be liable to pay GST.
One shall pay GST either
In simple words, GST has to be paid at the end of the project.
In a case, if a developer build both commercial and residential units on the same plot, then the exemption can be calculated by the following formula –
Exemption amount = GST Payable on TDR (consisting addition FSI) X Carpet area of a residential unit in the project ÷ Total carpet area of both commercial and residential unit in the project.
In such a case the developer would not have to pay GST as he will not be rendering construction services to the landlord. But, for the rights received he will be paying such amount as a consideration to the landlord.