GST Issues : Re-development of Existing Land Structure

By | August 21, 2017
(Last Updated On: August 21, 2017)

Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India

8. Re-development of Existing Land Structure

Sr. No. 3(i) of Notification No. 11/2017-Central Tax (Rate) dated the 28th June 2017 provides that:

(i) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of this service

Further, para 2 at the end of notification, provides for valuation of services in respect of the description herein above reads as under:

2. In case of supply of service specified in column (3) of the entry at item (i) against serial no. 3 of the Table above, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.

Explanation– For the purposes of paragraph 2, “total amount” means the sum total of, –

(a) consideration charged for aforesaid service; and

(b) amount charged for transfer of land or undivided share of land, as the case may be.


In case of redevelopment of the existing structure, fresh purchase of land is not involved. However, additional area of construction is carried out compared to earlier one. To carry out such a project, the builder developer must acquire the TDR, additional FSI and fungible FSI etc. on payment of premium to the corporation/from others in the
market. This is a huge expenditure to enable the developer to commercially exploit the potential of the plot of land. The plain reading of the para 2 of the Notification no. 11/2017-Central Tax (Rate), may not allow such deduction.


It is suggested that it be clarified that ‘land cost’ also includes amount spent to acquire  the “interest in land” i.e. amount spent on redevelopment of existing land.

Read ICAI Suggestions on GST Act to Govt : July 2017

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