CA Monika Motta
Quick Summary
Introduction: Real estate is an important sector of the economy and Joint Development Agreements (hereinafter referred to as JDA) forms one of the fundamental parts of such sector. JDA is an agreement entered between the landowner and the developer wherein the landowner would provide the right
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FAQ :
A JDA is an agreement where a landowner grants development rights to a developer in exchange for construction services and a share of the developed property.
The main issue is determining whether Service Tax (ST) or Goods and Services Tax (GST) is applicable to construction services when the JDA was signed before July 1, 2017, but construction continued into the GST regime.
The Karnataka Authority for Advance Ruling (AAR) ruled that GST is liable to be paid at the time of transfer of possession of the landowner's portion of the flats.
The article argues the AAR's ruling overlooked transitional provisions (Section 142(11)(b) of the CGST Act) which state that no GST is payable on services if tax was already leviable under the previous Service Tax regime.
The article contends that the point of taxation arises on the date the JDA was entered into, as this is when the developer receives consideration (development rights) for future services.
If a JDA was entered into before July 1, 2017, the article suggests that Service Tax would be applicable, not GST, for the services provided by the developer.
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