GST applicable on Free Area given existing members as redevelopment benefit: AAR:

GST applicable on Free Area given existing members as redevelopment benefit: AAR M/S. Sharda Vastu Nirmitee Private Limited is the legal applicant in this case. The applicant is a private company involved in the business of real estate redevelopment of old buildings, with a registered address, First Floor, 103-104, Maithili Chs, Ravi Compound, Panch Pakhadi, Thane, Maharashtra, 400602. The company has taken up a redevelopment project for an old residential housing society named Shree Dutta Vihar Co-Operative Housing Society Ltd., located in Thane, Maharashtra. The society's plot area is spread over 1130 square meters. The initial building consists of 22 residential members in it. Each member is occupying a carpet area ranging from 260 square feet to 680 square feet.

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The company signed a Development Agreement (DA) with the society on September 2, 2016. During that period, construction work was allowed under a 1:1.55 FSI scheme, which included 15% additional area as a redevelopment benefit and 40% FSI via Transferable Development Rights (TDR). In accordance with the agreement, every member of the society was required to receive an extra 14% of carpet area over and above their present flat size. Additionally, the developer committed to numerous monetary and logistical support services during the period of construction. Members are also given the opportunity to buy more area at a pre-decided rate.

Questions Asked by Applicant:

The applicant, M/S. Sharda Vastu Nirmitee Private Limited has filed the current application under Section 97 of the Central Goods and Services Tax Act, 2017, and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as "the CGST Act and MGST Act," respectively], seeking an advance ruling in respect of the following questions. "Question 1: Is GST payable ON AREA GIVEN FREE OF COST (which will include the following) to existing members in pursuance to the development agreement, where the development agreement was entered into on 02.09.2016 and amended subsequently by supplementary agreements on 01/12/2021 and 20/04/2024, respectively?

• Area in lieu of the existing area given
• Additional area given
• Amenities given
• Parking area
• Stamp duty & registration borne by the builder/developer?

Question 2: Is GST payable on monetary consideration payable to existing members in terms of a development agreement for residential apartment projects in the following form, where the development agreement is entered into on 02.09.2016 and amended subsequently by supplementary agreements on 01/12/2021 and 20/04/2024, respectively?

• Rent for alternate accommodation
• Brokerage for alternate accommodation
• Shifting charges
• Corpus to existing members
• Corpus to society?

Question 3: What will be the taxable value for the levy of GST on the area given free of cost to existing members (which will include the following) in pursuance to the development agreement, where the development agreement was entered into on 02.09.2016 and amended subsequently by supplementary agreements on 01/12/2021 and 20/04/2024, respectively?

• Area in lieu of the existing area given
• Additional area given
• Amenities given
• Parking area
• Stamp duty & registration are borne by the builder/developer."

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What Did the Ruling Say?

In accordance with the Maharashtra Authority for Advance Ruling (MAAR), the above questions are being answered as follows under Section 98 of the Central Goods and Services Tax Act, 2017, and the Maharashtra Goods and Services Tax Act, 2017: Answer 1: Yes, GST is payable ON the AREA GIVEN FREE OF COST to existing members in pursuance of the development agreement, where the development agreement was entered into on 02/09/2016 and amended subsequently by supplementary agreement on 01/12/2021 and 20/04/2024, respectively. AREA GIVEN FREE OF COST: Area at the place of existing area given, additional area given, amenities given, parking area, and stamp duty & registration borne by the builder/developer. Answer 2: The total consideration amount paid by the developer to the society, at the place of development rights, in the free flats and charges mentioned in the ruling. However, mere payments of monetary charges do not amount to the supply of services on the part of the developer, as he is payable these amounts. These amounts are in the form of consideration paid in addition to free units by the developer for acquiring development rights from the society. The taxation of development rights after 01/04/2019 is governed by entry 41A of NN 12/2017 CT(R) dated 28/06/2017. Answer 3: The value of the supply of the apartments to the initial members in place of the development rights is equivalent to the sale of similar apartments sold by the developer to the independent buyers nearest to the date on which the development rights are shifted.