Introduction

Levy of GST on TDR has always been a debatable topic among stakeholders since the inception of the GST Act in 2017. To understand this, one must differentiate between ‘Transferable Development Rights’ (TDR) and ‘Transfer of Development Rights. These two terms are pivotal in determining the tax implications of TDR under the GST Act.

Differentiating TDR and Transfer of Development Rights

Transferable Development Rights (TDR) refers to certificates issued for land acquired by the government for public purposes. These certificates are transferable and grant the right to construct or develop land within specific parameters.

On the other hand, Transfer of Development Rights involves the exchange of development rights between a landowner and a developer for constructing a building or complex.

Taxability of TDR in a GST Regime

The taxability of Transferable Development Rights(TDR) under the GST Act depends on whether it constitutes a supply of goods or services.

To determine this, let’s refer to the definitions of goods and services in the Constitution of India and the CGST Act.

Understanding TDR as Goods or Services

While ‘goods’ encompass movable property, immovable property, and benefits arising from land, one can consider TDR as immovable property.

The law clarifies that TDR represents benefits arising from land and hence falls under immovable property, not covered within the definition of goods.

TDR and Schedule III of the CGST Act

Schedule III of the CGST Act includes activities that do not constitute the supply of goods or services.

This schedule encompasses ‘sale of land’ and ‘sale of building.’ Courts have held that TDR, being a benefit arising from land, does not fall under the supply of goods or services.

Taxation of Transfer of Development Rights (DR)

In contrast, the transfer of Development Rights (DR) from a landowner to a developer constitutes a supply of service. This transfer attracts GST under Heading 9972 as a ‘Construction Service’ at a rate of 18%.

Conclusion: Tax Implications on TDR under GST Act

Transferable Development Rights (TDR), considered immovable property, are not taxable under the GST Act 2017. However, the transfer of Development Rights (DR) is categorized as a ‘Construction Service’ and is subject to GST.

This comprehensive understanding clarifies the nuanced taxation aspects of TDR and its implications under the GST Act, 2017.