Real Estate Needs Clarification on GST Rates for Commercial JDA

Refund Excess GST

Any Joint Development Agreement or JDA of commercial project or sale of development rights is not exempted from GST. For now, it is mandatory to clear all sorts of confusion on GST rates for Joint Development Agreement or development right sale, especially for commercial projects.

While certain exemptions are allowed for the transfer of development rights in a residential or housing JDA, commercial developments are denied of any exemptions. Clearly, because of the GST being imposed, the taxes on development in commercial projects is more than taxes on development in residential projects.

Hopefully, the issue will be considered by the Union Government and the transactions related to development rights will not be included under GST rather such transactions will come under the impact of immovable property.

Read Also: GST on Real Estate: Tax Burden Lower or Higher?

If we talk about the transfer of development rights under joint development agreements, GST is imposed on the transfer of development rights by the landowner to the real estate developer. The category is clearly of indirect tax and should not be included under GST. So, this calls for the attention and re-examination on the Government’s part.

According to managing director of an organization; to effectively achieve the target of giving Housing To All by 2022, the Union Government must check the requirements of home loan borrowers. In addition, the government also needs to consider the issue of affordability and stamp-duty. All the issues related to affordability and stamp duty should be included in GST.

The point that needs to be instantly considered by the government is to increase the threshold amount of affordable housing under Pradhan Mantri Jan Awas Yojna (PMAY) scheme to Rs. 75 Lakhs which is presently Rs. 45 Lakhs. In today’s market, the prices of lands are touching skies, making it impossible for the developer to deliver homes at the cost of only Rs. 45 Lakhs.

As per the recent database, approx 85% of the housing projects land under Rs. 45 Lakhs to Rs. 75 Lakhs, therefore it is recommended that the carpet area threshold value of affordable housing should be increased from 60 sqr mtr to 90 sqr mtr in metropolitan cities and in non-metro cities 90 sqr mtr to 120 sqr mtr.

Read Also: Income Tax Benefit on Home Loan Interest & Principle

By redesigning the policies of threshold values under affordable housing, the government can pack the number of projects under ‘affordable housing’, thus ensuring the vast portion of the market to avail income tax benefits.