Maruthi Reddy 15 June 2018

GST on Joint Development Agreement

Dear All, Joint Development agreeement was entered by LandOwner and Developer in 2015. Construction completed in June 2018. Flats are handed over to Land Owner in June2018 after Occupancy Certificate is issued. But Allocation agreement for flats was entered on 1/9/2015 itself. Whether VAT & Service Tax are to be levied by Developer or GST is to be levied by Developer? If so on what Value will it be levied as there will be no monetary consideration involved. Land Owner Portion is 45% and Developer portion is 55% of constructed area.

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Raghav Arora 15 June 2018

Hi! Thanks for the question!

Here, as the agreement was entered into before GST came into effect ( 1st July 2017), the terms and conditions of the agreement have to be complied with. So if there was a clause regarding the change in tax laws, same will have to be conformed to. If there was no such clause, then the GST will not be applicable as it does not have retrospective effect, but prospective effect so that it doesn't prove to be unduly beneficial to one party.

You stated that there is no monetary consideration in the transaction, which implies that there shall not be any tax on the same. However, until and unless the original agreement is not furnished a confirmed answer cannot be given.

This link - https://new.capradeepjain.com/amdview/gst-update-on-treatment-of-joint-development-agreements-part-9967 will further help in clarification of your query! Good Luck!