Introduction

Whether sale of TDR on land is subject to GST?

The transfer development right (TDR) / Floor space Index (FSI) for a consideration to a developer is subject to GST or not is a big question every land owner and developer looking after. The majority of them is of the view that since supply of land is neither treated as supply of goods nor supply of services as per clause 5 of schedule III to the CGST Act 2017, same is equally applicable to TDR/FSI as it relates to transfer of land / Immovable property.

Apart from above there is ambiguity in the minds of Developers / Land owners on rate of GST and its classification. The appeal has been filled before Maharashtra advance ruling authority (AAR) later put before Appellate authority of Advance Ruling (AAR) on Question:

Q.) Whether GST is leviable on sale of TDR/ FSI received as consideration for surrendering the joint rights in the land and further what will be the classification under GST and what will be the applicable rate of GST?

In this case appellant has referred to other statues for the term “LAND” as the term land has not been defined under GST Act . one such reference was made to Bombay Land Revenue code, 1879, which defines LAND as under :

“Land” includes benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth and also share in or charges on the revenue or rent  of village  or  other defined portions of territory.

Thus, in the view of the above definition of the term land the development rights in the land can be construed as land, and therefore any transaction pertaining to the sale of TDR would be out of purview of the GST. It is further contended by appellant that purpose and object of GST is not to levy tax on transaction of immovable property as the same  has been introduced by subsuming erstwhile  service tax , central excise and VAT.

The question for decision before AAAR is whether TDR in itself is land & building or Immovable property other than land & Building?

AAAR is of the view that, schedule III to the CGST Act, 2017 only mentions “LAND” to be outside the ambit of GST and not ‘benefits’ arising out of land. TDR is a benefit arising out of land and not land itself .          

It was held by Authority that sale of TDR /FSI would be leviable to GST under heading 9972, at the rate of 18% (9 % CGST , 9 % SGST) as prescribed under the entry at sl.no 16 (iii) of notification no 11/2017- Central Tax Rate , Dated 28-06-2017.

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