The author considers TDR to be a real estate asset, since TDR is linked to the land and is a benefit that derives from the land. [CHHEDA HOUSING DEVELOPMENT CORPORATION VERSUS BIBIJAN SHAIKH FARID – 2007 (2) TMI 664 – BOMBAY HIGH COURT]. Unfortunately, the government has considered the TDR to be a service under the GST Act and the imposition of taxes on it. [NN- 04/2018 and AAR in the case of IN RE: M/S. VILAS CHANDANMAL GANDHI 2020 (2) TMI 554 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA and AAR Karnataka in the case of Maarq Spaces 2019 (11) Tmi 994 – AUTHORITY FOR ADVANCE RULING, KARAKA However, once this case is examined through the courts, there would be even more clarity as to whether it is indeed a service or a property. In a similar case in Nforce Infrastructure Pvt. Ltd[20 G.S.T.L. 184], the Authority decided that the taxpayer would provide the development rights provider with construction services in the form of a transfer of development rights. In similar lines, in the case of the JDA sharing area, GST is payable on an RCM basis by the developer, on the acquisition of development rights. The load and applicability are the same as those of the cost-shared JDA discussed above.
Sometimes the landowner can have the construction built for his own use for the purposes of his residence and agrees to share a potion of built area with the developer, even according to a JDA model. In this case, the landowner never intends to give up his share of the built-up area. So, in such a situation, if TDR is taxable? The author considers that TDR should not be taxable in such cases, as it has never been with the intention of doing business or as part of the promotion of a transaction by the owner. The conditions of Section 7 are therefore not fully met and therefore there should be no supply. In addition, there will never be a commercial motive or profit in such transactions. However, it can also be argued that the definition of “business” as defined in Section 2(17) is very broad and encompasses any trade, trade, manufacturing, occupation, vacation, adventure or other similar activity, whether it is a financial benefit, regardless of the magnitude, frequency, continuity or regularity of that activity or transaction. Therefore, the activity of transfer of development rights by a landowner, individual or not, is a service subject to the GST. But with all due respect to the AAR, the author asks to be different here. Land that is real estate and a state-specific matter has already been kept outside the constitutional framework and GST law.
So there is no GST in the countryside. Therefore, once the valuation, including the value of the land, is carried out and only 1/3 (which is significantly less than the actual value of the land) is deducted from that value, it means that a share of the lion is always included in the assessment because of the value of the land and the tax is levied on that value. So indirectly Govt. GST is also calculated on land supply. It is a firm position that what is not authorized directly by the government cannot do so indirectly. [COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY VERSUS ACER INDIA LTD. 2004 (9) TMI 106 – SUPREME COURT. Approved by COMMISSIONER OF CENTRAL EXCISE, INDORE VERSUS M/S GRASIM INDUSTRIES LTD. THROUGH ITS SECRETARY 2018 (5) TMI 915 – SUPREME COURT]. In addition, Article 265 of the Indian Constitution provides that no tax can be levied without the authority of the law. It therefore appears to be wrong to impose indirect taxes on the value of the land.
The actual GST rate for construction housing, real estate or commercial real estate is 18%. However, one in 18% is considered a value of undivided land or land that is made available to the purchaser of the land. Also effective rate will be 12% with full ITC. C. Any other amount charged by the developer by the buyer of the dwelling, including preferential location fees, development fees, parking fees, common facility fees, etc.