What is development rights in GST context?

In the GST context, Development Rights refer to the right granted by a landowner to a real estate developer to develop and construct on the landowner's land typically in exchange for a share of the constructed units, money, or both. This is commonly seen in Joint Development Agreements (JDAs). GST treatment of development rights has been a complex and evolving area since GST's rollout in 2017.

Types of Development Rights

• Transferable Development Rights (TDR): Issued by government authorities as compensation for land acquisition or development obligations.
• Development Rights under JDA: Contractual rights given to a developer to build on private land.

GST on Transfer of Development Rights (TDR/FSI)

• Landowner transferring development rights to developer: 18% Developer pays under Reverse Charge Mechanism (RCM).
• Developer transferring TDR/FSI received from government: 18% Buyer of TDR pays under RCM.
• Transfer of Floor Space Index (FSI): 18% Under RCM.

Reverse Charge Mechanism in JDA

When a landowner transfers development rights to a developer under a JDA, the developer is liable to pay GST under Reverse Charge Mechanism (RCM) at 18% on the value of development rights. The value is typically calculated based on the fair market value of the land or the units given back to the landowner.

Development rights under a JDA attract 18% GST under Reverse Charge Mechanism on the developer. The timing of GST liability depends on when the project is completed or when units are transferred, making accurate planning essential.