We entered into a Joint Development Agreement with a Builder to construct flats on our grandfather’s property. We four legal heirs got one flat each as our share. The Builder completed the construction and got the Completion Certificate from Chennai Corporation in 2019.

During the initial JDA, I made a separate agreement with the Builder to sell my portion of the flat directly to a buyer without transferring the flat in my name. The builder made a separate agreement with the buyer and the flat registration was completed in February 2020 directly in the buyer’s name.

The builder had collected 5 per cent of the Sale Value towards GST from me.

Please clarify the following:

1) Since the sale happened directly without transferring the flat in my name, who has to pay the GST?

2) Before the registration, the builder got the Completion Certificate from the Corporation. In this case, does anyone have to pay GST?

Subramaniam P G

We understand that the land owner has entered into a Joint Development Agreement (JDA) with a builder to construct flats on or after April 1, 2019, or opted to pay GST under the new scheme. The completion certificate (CC) for the property has been received in 2019 (assuming the CC has been received in December 2019). Further, the agreement to sell the flat to final buyer was entered post receipt of CC (i.e., no consideration was before the completion certificate).

Based on the above understanding, we have provided below the GST implications for each leg of the transaction:

Transfer of development rights by land owner to developer: Service by way of transfer of development rights for construction of residential apartments by a developer to the land owner with the intention to sell to a buyer would be subject to GST in the hands of the developer for unbooked flats on the date of issuance of CC or first occupation, whichever is earlier. In such a case, GST shall be payable at the rate of 5 per cent [7.5%*2/3 (1/3 deduction for the value of land)] under the reverse charge mechanism by the developer.

Sale of flat to buyer post-issuance of CC:GST shall not be applicable on the sale of immovable property where the entire consideration is received after issuance of CC. Here, we understand that agreement with the buyer was post-issuance of CC. Accordingly, GST shall not be applicable on the sale of such flat to the buyer. Please note that we have provided our view based on the above facts and assumptions. In case of any change in facts, the GST implication may also change.

The writer is Partner, Deloitte India

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