GST on Landowner's Share of Flats in Joint Development Agreements
The Authority for Advance Ruling in Kerala confirmed that developers must pay GST on construction services provided for a landowner's share of flats.
- Ruling
- ADVANCE RULING No. KER/30/2025 Dated 08.10.2025
- Dated
- 08 Oct 2025
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Landowner's share of flats is a taxable supply of construction services.
- Construction services for landowners are taxed at 5% without input tax credit.
- Development rights are subject to GST under the reverse charge mechanism.
- Valuation is based on the open market value of similar independent units.
In short
The company asked if they must pay Goods and Services Tax (GST) when they give a share of newly built flats to a landowner in exchange for development rights. The authority confirmed that this exchange is a taxable service. Developers must pay tax on the construction work provided to the landowner and may also owe tax on the development rights themselves.
What has changed
How it worked before
The tax treatment of landowner shares in joint development projects was often debated, with some developers unsure if the exchange of land rights for construction services triggered a specific GST liability.
What has changed
The authority ruled that the construction service provided to the landowner is taxable at 5%. Additionally, for any units that remain un-booked when the project is finished, the developer must pay GST on the development rights under the reverse charge mechanism. This means developers must carefully calculate the market value of these units to determine their tax liability.
Who this affects
Real estate developers entering into joint development agreements with landowners.
An example
Imagine a developer, BuildRight Homes, who gives 10 flats to a landowner in exchange for land rights. BuildRight must pay 5% GST on the value of those 10 flats, using the price of similar flats sold to other customers as the benchmark. If two of those flats remain unsold when the project is complete, BuildRight must also pay 18% GST on the development rights for those specific units under the reverse charge mechanism.
What you should do
This ruling only applies to the specific company that asked the question. If you are a developer, you should consult with your tax advisor to see how this logic applies to your specific agreement, as your local tax officer may have a different view.
If you do nothing
If you assume this ruling automatically applies to your business and calculate your taxes incorrectly, you risk penalties and interest charges. A tax officer is not legally bound by this decision and may demand payment based on their own interpretation of your specific contract. Always seek professional advice tailored to your own project documents.
The terms explained
- Joint Development Agreement
- A contract where a landowner provides land to a developer, who then builds a project and gives the landowner a share of the finished units.
- Reverse Charge Mechanism
- A system where the person receiving a service, rather than the person providing it, is responsible for paying the GST to the government.
- Input Tax Credit
- A system that allows businesses to reduce their tax bill by claiming back the GST they paid on their own business purchases.
The ruling in detail
Authority for Advance Ruling
M/s SI PROPERTY KERALA PRIVATE LIMITED
ADVANCE RULING No. KER/30/2025 Dated 08.10.2025 · Keralam
Questions before the authority
- Whether GST is applicable to the Landowner's share of constructed residential flats?
- If GST applicable on point 1 above, what will be the rate of GST and the value on which such GST is applicable?
Facts
The applicant is a developer who entered into a Joint Development Agreement (JDA) with a landowner to construct a residential apartment complex. Under the agreement, the landowner transfers development rights to the applicant in exchange for a share of the constructed residential flats. The applicant sought clarity on the GST implications regarding this transfer of development rights and the construction services provided to the landowner.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of GST on landowner's share | Yes, GST is applicable. Considered a taxable supply of construction services in exchange for development rights. |
| Rate and value of GST | 5% GST (without ITC) on construction services; 18% GST on development rights under RCM. Value of construction service is the open market value of similar flats; RCM applies to un-booked units at completion. |
The Authority ruled that GST is applicable to the landowner's share of constructed residential flats as it constitutes a taxable supply of construction services in exchange for development rights. The developer is liable to pay GST on these services, and the value is determined based on the open market value of similar apartments sold to independent buyers. Additionally, the developer is liable for GST on the transfer of development rights under the reverse charge mechanism for any units remaining un-booked at the time of completion.
Reasoning
The Authority determined that the JDA constitutes a supply under Section 7(1)(a) of the CGST Act, as it involves an exchange of development rights for construction services. Relying on Notification No. 03/2019-Central Tax (Rate), it held that the construction service provided to the landowner is taxable at 5% without ITC. Furthermore, it cited Notification Nos. 04/2019, 05/2019, and 06/2019 to establish that the transfer of development rights is a taxable service subject to GST at 18% under the reverse charge mechanism, specifically for units remaining un-booked upon completion.
Provisions relied on
- Section 7(1)(a) of the CGST Act, 2017
- Section 9 of the CGST Act, 2017
- Notification No. 11/2017-Central Tax (Rate)
- Notification No. 03/2019-Central Tax (Rate)
- Notification No. 04/2019-Central Tax (Rate)
- Notification No. 05/2019-Central Tax (Rate)
- Notification No. 06/2019-Central Tax (Rate)
For the practitioner
This ruling confirms that **landowner's share of flats** in a JDA is a taxable supply of construction services subject to 5% GST. It clarifies that developers must also account for **GST on development rights** under the reverse charge mechanism for unsold inventory at the time of completion. Practitioners should note that the valuation for these services is linked to the open market value of similar units sold to independent buyers.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/2-si_property.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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