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Landlord Liability to pay GST on a JDA


Prabhakar Mekala (Landlord)     05 March 2020

Prabhakar Mekala
Landlord 
 44 points

| My Other Post

Dear CA community

Facts:

1. Landlords entered into JDA with developers in Aug 2017 to build a commercial complex.

2. As per the JDA the developers will be getting 50% of the complex and 50% of the land in lieu of the development. The JDA clearly earmarks how the square footage is divided between landlords and builders.

There are multiple landlords and their shares are clearly elaborated in the JDA but as undivided shares.

3. Current status of the project is that construction is not complete. It is due to be completed in the next 3 to 4 months post.

4. Occupancy certificate has not been obtained from govt yet 

5. No allotment letter has been issued by the builders yet to the landlords

6. The owners have not sold any share of theirs nor they intend to sell

7. The builders have sold a minor part of their share

8. The clause dealing with GST in the JDA states the below:

"The service tax/GST any pertaining to the owners share, if any applicable as per Govt rules shall be born by the owners"

9. None of the landlords have GST numbers. Builder has GST number.

 

Question:

1. In the first place are landlords liable to pay GST in the above case ? Especially since they are not selling their share.

2. There is an expert opinion everywhere that the applicability of the GST to landlords will depend on the way the JDA is written. What does that mean ? While clause in the JDA is critical in this context ? What attracts GSY liability for a landlord ?

2. If they are liable to pay GST then when are they supposed to pay ? After issue of allotment letter from the builder or at the time of entering into JDA i.e. in Aug 2017 ?

3. If liable to pay GST then can the landlords transfer the money to builder bank account and pay the GST using builder's GST number ?  We are being told that builder can specify that part of the GST he is paying is for landlords share.

4. If liable to pay GST then are the landlords allowed to create respective GST numbers of their own and each one pays their own respective GST ? What will happen if some of the land lords pay GST and some dont ? Remember landlords are getting undivided but clearly earmarked shares as per the JDA.

Please help.

Rgds

 

 

 

 

 

 

 

 

 

 

avater

Dhirajlal Rambhia (KVO Merau Kutchh)     08 March 2020

Dhirajlal Rambhia
KVO Merau Kutchh 
 9216 likes  93285 points

View Profile | My Other Post

1. It is the duty of the developer to collect GST over the owners' flats from the owner/s, and pay it to treasury.

2. Some times the liability of the GST is also transferred over the developer, by incorporating such clause in the agreement. Which is not in your case.

3. Developer should give separate receipt for the said GST collected from the owners.

4. No GST registration for owners. Builder has to collect it from owners.

2 Like
avater

Prabhakar Mekala (Landlord)     08 March 2020

Prabhakar Mekala
Landlord 
 44 points

View Profile | My Other Post

Thank you Dhirajlal sir for your kind reply.

Just a couple of follow up questions:

1. Obviously in our case above we as landlords are paying for the construction service provided by builder. But sir would it still be the case if we had signed the JDA in 2019 instead of Aug 2017 ? Because as per the beloe list of govt GST orders issued in 2019 there is no GST for landlords. Is my understanding correct ?

https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=8766

 

2, In case there are judgements from relevant tribunals in future that in a case like ours (i..e when landlord is not seeling his share) landlords need not pay GST then can we claim refund or litigate on that aspect for refund ?

 

Once again thank you very much for your valuable time sir.

avater

Prabhakar Mekala (Landlord)     10 March 2020

Prabhakar Mekala
Landlord 
 44 points

View Profile | My Other Post

Sir

1. We are being advised that in the above case the GST paid via builder can be utilized for claiming credit towards GST payable for commercial rent exceeding 20 lakhs in the coming years.

Is that true ?

2. In that case should the landlords take individual GST number and provide to the builder so that the GST amount paid by each landlord is recorded when the builder makes the GST payment ?

Thanks a ton in advance.

 

 

 

avater

Dhirajlal Rambhia (KVO Merau Kutchh)     15 March 2020

Dhirajlal Rambhia
KVO Merau Kutchh 
 9216 likes  93285 points

View Profile | My Other Post

1. Obviously in our case above we as landlords are paying for the construction service provided by builder. But sir would it still be the case if we had signed the JDA in 2019 instead of Aug 2017 ? Because as per the beloe list of govt GST orders issued in 2019 there is no GST for landlords. Is my understanding correct ?

Not correct. That is forGDT over TDR received by builder


2, In case there are judgements from relevant tribunals in future that in a case like ours (i..e when landlord is not seeling his share) landlords need not pay GST then can we claim refund or litigate on that aspect for refund ?

Yes, you can, but no chance. As it is taxable supply under GST.

1 Like
avater

Dhirajlal Rambhia (KVO Merau Kutchh)     15 March 2020

Dhirajlal Rambhia
KVO Merau Kutchh 
 9216 likes  93285 points

View Profile | My Other Post

1. We are being advised that in the above case the GST paid via builder can be utilized for claiming credit towards GST payable for commercial rent exceeding 20 lakhs in the coming years.

Is that true ?

No. That is altogether different business.

2. In that case should the landlords take individual GST number and provide to the builder so that the GST amount paid by each landlord is recorded when the builder makes the GST payment ?

You can get ITC only when you sell the property before completion of the project, not otherwise.

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