Exemptions of GST on TDR and FSI for construction of residential apartments

Entry number 41A has newly been inserted with effect from 1^st April 2019 to include exemption relating to transfer of development rights and floor space index for construction of residential apartment under GST.

Accordingly the service by way of transfer of development rights (herein referred to as TDR) or floor space index (FSI) (including additional FSI) on or after 1^st April 2019 for construction of residential apartments by a promoter in a project intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, wherever required, by the competent authority or after its first occupation whichever is earlier.

Computation of amount of exemption : The amount of GST exemption available for construction of residential apartments in the project under this notification shall be calculated as under:-

GST payable on TDR or FSI (including additional FSI) or both for construction of the project/carpet area of the residential apartments in the project ÷Total carpet area of the residential and commercial apartments in the project

Conditions :-

1.) Promoter liable to pay tax on reverse charge mechanism basis on unsold flats : The promoter shall be liable to pay tax at the applicable rate on reverse charge basis on such proportion of the value of development rights or FSI (including additional FSI), or both, as is attributable to the residential apartments, which remain on booked on the date of issuance of completion certificate, or first occupation of the project as the case may be in the following manner:-

GST payable on TDR or FSI (including additional FSI) or both for construction of the residential apartments in the project but for the exemption contained herein × carpet area of the residential apartment in the project which remain un-booked on the date of issuance of completion certificate or first occupation ÷ total carpet area of the residential apartments in the project

2.) Maximum amount of tax payable : The tax payable as above shall not exceed 0.5% of the value in case of affordable residential apartments and 2.5 % of the value in case of residential apartments other than affordable residential apartments remaining un-booked on the date of issuance of completion certificate for first occupation.

3.) When is tax payable : The liability to pay Central tax on the said portion of the development rights or FSI, or both, calculated as above, shall arise on the date of completion or first occupation of the project, as the case may be, whichever is earlier

Similar provisions has also been added, relating to exemption of upfront amount in case of long term lease for construction of residential apartments vide entry 41B of notification Number 12/2017, with effect from 1^st April 2019.

Hence, the upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long-term lease of 30 years or more on or after 1^st April 2019, for construction of residential apartments by a promoter in a project intended for sale to a buyer fully or partly except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier has been exempted in the same manner as provided in case of TDR or FSI.

Accordingly all the provisions of TDR or FSI will apply in the same manner to the upfront amount in case of long term lease.

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