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Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

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GST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS - PART I

GST UPDATE ON TREATMENT OF JOINT DEVELOPMENT AGREEMENTS - PART I


Joint Development Agreements are also called tri-partite agreements as three parties are involved in such contracts, namely a builder, land owning party and the contractor who undertakes construction services. The developer enters into a development agreement with landowner, whereby the developer acquires the development rights with respect to the land. The development right entitles the developer to obtain licenses and approvals from the government authorities, construct the building on the land as per its own design and architecture, determine the price of the units, negotiate and enter into flat buyers agreements and execute sale deeds with buyers.
The transfer of development rights by landlord to developer involves payment of consideration. Such consideration is generally given in kind by way of ownership rights of certain percentage of the developed area. The developer receives consideration normally in two ways:
• From landowner, in the form of land /development rights; and
• From other buyers, in the form of money
Let us take an illustration. For instance assume, ABC developers limited enters into a agreement with land owner Mr. XYZ whereas in lieu of this agreement a total of 1000 residential units will be constructed by ABC ltd on the land provided by Mr. XYZ whereas 40% of the units i.e. 400 units shall be given to Mr. XYZ and rest 600 units shall be taken by ABC ltd. Both can commercially sell the units in the open market. Land owner gets 400 units of flats in lieu of the land given and Developer gets 600 units of flats in lieu of the construction work done.
Based on above, redevelopment transaction is a barter transaction between landowner and developers. Here developer is providing construction service to landowner. Value of construction service shall be ascertained on the basis of flats given to landowner in exchange of development rights given by him to builder.
Further, as per decisions taken in 14th Meeting of the GST Council held on May 18-19, 2017 in Srinagar, J&K; 18 sectoral groups have been constituted representing various sectors of the economy in order to ensure smooth roll-out of GST. One such sectoral group is "MEDIA & ENTERTAINMENT SECTORAL GROUP" which has issued some FAQs on GST in respect of Construction of Residential Complex by Builders/Developers. In these FAQs, following clarification has been given in respect of land owner's share of the flats/houses:-
"Q.16) Whether GST is payable on the owner's share of the flats/houses/portion of the building constructed by the builder/developer and given to the land owner as per the development agreement?
Ans. 16:- The builder/developer is liable to pay GST even on the share of the land owner and given in lieu of the land received for the development, besides GST on the builder/developer's share of the complex/building.
In the above transaction, the builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. Thus the builder is liable to pay GST not only on his portion of the complex/building, but also on the share of the land owner.
Therefore, the above stated clarification also proves that there is no ambiguity on the issue that the GST is payable even on landowner's share of flats. The other aspects like point of taxation and valuation, etc. will be discussed in the subsequent part of this series.

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