Liability for floor index ratio/ floor area ratio

1. Applicability of GST on FAR (Floor Area Ratio) Charged by Development Authority

• The service of granting development rights or Floor Space Index (FSI), including additional FSI, is subject to GST at 18% as per Sl. No. 16, Item (iii) of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017​.

• However, Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017, Entry 4, provides an exemption for services provided by a government or local authority in relation to a function entrusted under Article 243W of the Constitution​.

• If the Development Authority qualifies as a "Governmental Authority" (having 90% or more equity owned by the government), its services may be exempt under this entry. However, the nature of the service must align with the exempted functions specified under Article 243W.

2. Taxability of FAR Service Provided by Developer Authority to Promoters

• When a development authority provides FAR or FSI services to promoters, GST is applicable at 18% under Heading 9972 of Notification No. 11/2017-Central Tax (Rate)​.

• Exemptions under Notification No. 12/2017 may not apply if the service is not directly linked to functions under Article 243W​.

• The ruling on long-term lease of land under Notification No. 12/2017, Entry 41, might provide relief in some cases if the FAR is part of such transactions​.