Uncertainty about the applicability of the goods and services tax on joint development agreements, an increasingly popular form of property construction in West Bengal, is expected to result in a large number of cases being filed in the Calcutta High Court. 

Uncertainty about the applicability of the goods and servicesNSE 0.27 % tax on joint development agreements, an increasingly popular form of property construction in West Bengal, is expected to result in a large number of cases being filed in the Calcutta High Court. 

Until now, landowners has no issues with joint development agreements involving area share, where ownership of the land was transferred. Only stamp duty was payable unless a separate consideration was reached for the transfer of development rights. The situation changed when a notification in January said GST was payable by both landowners and developers. 

Baheti said landowners will have to obtain GST registration, file returns, pay tax and maintain books of accounts even though they may not be willing to undertake additional compliances and thus, come under the scanner of the tax authorities. 

According to tax experts, there is ambiguity with respect to ‘the point in time’ when tax has to be paid and this may lead to conflicts between landowners and developers. 

There also seems to be lack of clarity over the value on which GST is to be paid on the transfer of development rights. If the value on which GST is paid – initially by the landowner – is found to be lower by the tax authorities, the developers may not be able to claim input tax credits. 

Kolkata’s real estate circle has voiced concern over ‘the point of taxation’ and the ‘valuation of flats’ allotted to landowners, prompting the West Bengal wing of the Confederation of Real Estate Developers’ Associations of India, an umbrella organisation of builders from the state, to seek clarifications. 

Industry experts said the January notification assumes significance, with a majority of landlords and builders opting to sign joint development agreements rather than outright land deals. While builders prefer this because it supports their capital-light business strategy, landowners are usually in it for higher revenue potential than just a one-time consideration. 

 

 

 

Source: Economic Times

 

 

We have launched Single Platform on GST Compliances In India, assisting in 4 areas – 1) Compliances, 2) Litigations & Hearings, 3) Training  4) Consultancy. Click this link for any assistance.