JOINT DEVELOPMENT AGREEMENTS & REAL ESTATE TRANSACTIONS ON INCOME TAX AND GST – CA L VENKATARAMANAN

Preface

Taxation of real estate transactions had been a very complex subject even in the era of erstwhile General Sales Tax law, Value Added Tax law and Service Tax law. The Goods and Services Tax regime is no exception. Taxation of Joint Development Agreements (JDA) is one of the important aspects under the Taxation of Real Estate Transactions under the GST regime. Under these Agreements, various transactions are involved i.e., transfer of land or development rights by the land owner to a Builder or Developer, construction of real estate project by the Builder/developer himself or outsourcing such work to an outside contractor, transfer of flats/shop/commercial units or constructed area to land owner by the builder/developer, as mutually agreed upon.

Under the Goods and Services Tax law, specific provisions have been made for levy and collection of GST on real estate transactions, in particular Joint Development Agreements. Specific rates of tax relating to real estate transactions have been specified under Notification No. 11/2017-Central Tax (Rate), dt. 28-6-2017. Some transactions have been exempted by including the same under Notification No. 12/2017-Central Tax (Rate), dt. 28-6-2017 and certain inward supplies received by a Promoter from unregistered persons are made chargeable to tax on Reverse Charge (RCM) basis under Notification No. 13/2017-Central Tax (Rate), dt. 28-6-2017.

With a view to cover entire gamut of levy and collection of GST as well as Income-tax on the real estate transactions, in particular, Joint Development Agreements, the present book has been conceived and written so as to satisfy the needs of the practising Chartered Accountants, GST Consultants and Tax Practitioners, engaged in their niche practice of taxation of real estate transactions.

For ease of convenience, the book has been divided into the following six parts, namely:

Part I of Book contains 33 chapters covering various aspects of levy of GST on Joint Development Agreements, most importantly Meaning of Supply, Place and Time of Supply, Composite and Mixed Supply, Construction of Immovable Property Transactions, Transactions Exempt from GST. It also contains specific chapters vis-a-vis JDA Model discussing GST liability of Land Owner, Developer and Contractor, GST liability in respect of Residential Apartment, Commercial Apartment and Residential House and also GST Liability on Works Contract Services. In addition, some important substantive and procedural aspects relating to GST law viz., Value of Taxable Supply, Input Tax Credit, Registration, Maintenance of Accounts and Records, Payment of Tax and Adjudication Proceeding, have been incorporated.

Part II of the Book provides an overview of income tax implications on the real estate transactions including Joint Development Agreements in as more as 20 chapters. The provisions relating to computation of Capital Gains as well as income from Business in respect of Builders, Developers and contractors have been discussed at length. Some Practical Issues with export opinions have also been provided on taxation of land development agreements. Specific discussion has also been made in respect of Section 50D, Section 50C, Section 43CA, Section 23(5), Section 56(2)(x)(b) and Section 80-IBA of the Income-tax Act, 1961, under distinct Chapters.

Part III of the book provides an overview of the provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA) and its implications on the real estate projects. This part contains as more as 20 chapters covering an analytical study of various statutory obligations of promoters/builders under RERA.

Part IV of the Book covers important finance aspects relating to Joint Development Agreement and important points to be considered in framing a typical Joint Development Agreement.

Part V of the Book titled Overview of Prohibition of Benami Property Transactions Act, 1988 contains 10 chapters covering commentary on important aspect viz. Benami Property, Benamidar and Beneficial Owner, Prohibition of Benami Transactions, Attachment of Property, Attachment of Benami Property and Adjudication of Benami Property.

Part VI of the Book titled “Appendix” contains full text of the relevant Statutory provisions under the Central Goods and Services Tax Act, 2017 as well as the Central Goods and Services Tax Rules, 2017. The full text of the Real Estate (Regulation and Development) Act, 2016 has also been reproduced. In addition, full text of the relevant Notifications, Circulars and FAQs referred to in the book have been reproduced under this part. At the end of this Part, some sample Land Development Agreements have been provided as a guidance for preparing such agreements.

We believe that the book shall be immensely useful for the entire fraternity of Chartered Accountants in practice and those placed in the Real Estate Sector, GST Consultants and Tax Professionals who are engaged in their niche practice of GST as well as Income-tax concerning Joint Development Agreements and immovable property related transactions.

Notwithstanding the best of our care, the likelihood of certain shortcomings having crept into this book cannot be ruled out. We, therefore, solicit creative feedback from our esteemed readers to bring to our notice any mistakes, errors, omissions or discrepancies, as and where noticed by them.