Transfer of development rights or Floor Space Index (FSI) including additional FSI for construction of a project
Any Person
Promoter
This entry is inserted vide notification no 5/2019-CTR dated 29th march, 2019 and is effective from 1st April 2019. Though we are going to discuss taxation of real estate in a separate chapter in detail, here we will have a brief understanding of this entry which is related to real estate.
In a typical joint development agreement (JDA), the landowner transfers development rights or FSI to a promoter in exchange for a portion of the constructed area or monetary consideration. The promoter undertakes construction on the land using such rights. These arrangements were earlier mired in uncertainty under GST, leading to different interpretations and non-uniform tax treatment.
To resolve this, the government clarified that when a person transfers TDR/ FSI to a promoter, it shall be taxable under GST, and the promoter shall be liable to pay GST under reverse charge as the recipient of service.It has also been provided in the notification that - the term "project" shall mean a Real Estate Project (REP) or a Residential Real Estate Project (RREP)
- the term "Real Estate Project (REP)" shall have the same meaning as assigned to it in in clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).
- The term "Residential Real Estate Project (RREP)" shall mean a REP in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the REP.
- "Floor space index (FSI)" shall mean the ratio of a building's total floor area (gross floor area) to the size of the piece of land upon which it is built."
Detailed issues on time of supply, value of supply and other comprehensive points are discussed in a separate chapter on Real Estate.