GST payable at the time of transfer of possession/ rights in the building to the person supplying development rights

Last updated: 26 July 2021

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This ruling clarifies when Goods and Services Tax (GST) is due when a developer transfers possession or rights in a building to a landowner in exchange for development rights. The Telangana AAR determined that GST becomes payable on the date possession of the building is transferred to the landowner. This date is considered the 'time of supply' for tax purposes, regardless of when the agreement was initially made.

Court :
AAR, Telangana

Brief :
In Re: M/s. Vajra Infracorp India Private Limited [TSAAR Order No.03/2021 decided on July 19, 2021] wherein the assesee is provider of taxable services of construction of residential complexes.

Citation :
TSAAR Order No.03/2021 decided on July 19, 2021

In Re: M/s. Vajra Infracorp India Private Limited [TSAAR Order No.03/2021 decided on July 19, 2021] wherein the assesee is provider of taxable services of construction of residential complexes.

The assessee entered into a supplementary agreement with landowner on May 15, 2017 (pre-GST) duly fixing the total number of flats to be shared with the land owner and construction was expected to be completed by October/November 2018 (post-GST).

The assesee sought clarification on time of supply and point of taxation with respect to flats allotted to land owner by the builder by way of supplementary agreement.

The AAR, Telangana held that as per Notification No.4/2018- Central Tax dated January 25, 2018 the date of transfer of possession of the building or the right in it to the person supplying development rights will be the time of supply and the liability to pay tax on the said services shall arise on that day. The time of supply shall not be at any other time.

FAQ :

GST is payable at the time of transfer of possession of the building or the rights in it to the person supplying the development rights.

The 'time of supply' is defined as the date when possession of the building or the rights in it are transferred to the person who supplied the development rights.

No, the time of supply is determined by the date of transfer of possession, not by any earlier agreement date.

The ruling was made by the AAR (Authority for Advance Rulings) in Telangana.

The services considered are the taxable services of construction of residential complexes provided by the assessee (builder).

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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