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11 FAQs on TDR in Real Estate under GST

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.

1. Who is a developer?

A developer or promoter is the person who develops a plot into apartments and promotes it for sale.

2. Who is a landowner?

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.

3. What is TDR?

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 Transferable Development Right (TDR).

4. Whether TDR is taxable?

TDR is not taxable under GST until or unless the developments rights are transferred to construct residential units. 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.

5. If TDR is taxable on the construction of commercial units?

TDR is not taxable where the result from such transfer is a residential unit. On the contrary, the TDR service will be taxable for construction of commercial units.

6. What should be taxed?

GST will be applicable on supply of TDR when-

There are some residential units left as an inventory after the receiving completion certificate.

Commercial units

Let us understand this with an example:

  • If there is a 100 unit’s project including flats and shops.
  • Out of which 60% are residential unit i.e. 60 units (40 units are sold before completion certificate and remaining 20 are left as stock) and
  • 40 units are commercial shops.

In such case, GST will be applicable to supply of TDR service to an extent of 20 residential units and 40 commercial units.

7. What Value ought to be considered for taxability?

The Value of supply of goods against consideration will be equivalent to the value charged from the buyer, nearest to the date of TDR.

8. Who will pay GST on the supply of TDR?

The TDR service falls under the reverse charge mechanism (RCM). In simple words, the developer to whom the TDR has been supplied will be liable to pay GST.

9. When does one have to pay the GST on TDR services?

One shall pay GST either

  • On the date of Completion certificate; or
  • 1st occupancy (Whichever is earlier)

In simple words, GST has to be paid at the end of the project.

10. How to find an exemption amount in case if a developer builds both commercial and residential units on the same plot?

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.

11. What shall be done if the landlord receives money as consideration from a developer for the supply of TDR services?

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.

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GST Compliance