GST on Joint Development Agreement (JDA)
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GST on JDA (Joint Development Agreement)
A Joint Development Agreement (JDA) is a contract between a landowner and a real estate developer to build a new project on the land of the owner. The real estate builder constructs the building and other things. On the contrary, the owner of the land will provide land to construct the building. GST on JDA is charged at the rate of 18% on the contract’s value. Moreover, there are 2 kinds of Joint Development Agreement (JDA) and they are:
- Area Sharing Joint Development Agreement (JDA)
- Revenue Sharing Joint Development Agreement (JDA)
However, the main question arises about the applicability of GST on Joint Development Agreement (JDA) which will be discussed further.
Parties involved in the Joint Development Agreement (JDA)
Here are the transactions and parties that can be engaged in a JDA (Joint Development Agreement) are:
- Landowner to Developer
Under this Joint Development Agreement (JDA) the landowner has to transfer its development right to the developer. In return, the landowner gets a continuous supply of construction service from the developer over a period of time. Moreover, the GST on JDA is applicable at the time of supplying such construction services.
- Developer to End Consumer
To provide construction services with the real estate developer enters into construction agreements with homebuyers. Moreover, on such construction services, the GST on Joint Development Agreement is applicable. However, there is a catch on the applicability of GST on the real estate transaction. If the property is under construct then the GST is applicable on the property transaction otherwise if the property is fully constructed then no GST on JDA is applicable on it.
Merits of Joint Development Agreement (JDA)
Here is the list of some important merits of Joint Development Agreements (JDA):
- The parties can cut the cost on the stamp duty partly.
- For the developer, it is not required to invest in land or site initially.
- The property will be developed quickly and will require less working capital on approval and construction comparatively.
- Under Joint Development Agreement (JDA) the party can get a secured loan by vowing the site or the land.
- The investor will get the most benefit as he/she will get competent consideration.
GST on JDA (Joint Development Agreement)
After the implementation of GST to sort out the doubts real estate sector regarding the applicability of GST on Joint Development Agreement, the Government has prescribed some provision regarding this through a notification on the said matter.
At the point when a developer comes into contract with the landowner using Joint Development Agreement (JDA), GST will be payable by the owner of the land at the time when the developer transfers back the rights or possession to the landowner by signing an allotment letter/conveyance deed. When the landowner gets a constructed building from the developer in exchange for the land they have given, the landowner has the responsibility for paying the GST on development agreement.
What Is the Cost of Joint Development Agreement?
The Cost of a Joint Development Agreement (JDA) in India Doesn’t Have a Fixed Price. It Depends on Factors Like the Complexity of the Project, Property Value, and Lawyer’s Experience. Expect to Pay Anywhere From ₹25,000 to Several Lakhs Depending on These Variables.
GST on JDA With Examples
If the landowner gives his land to the developer and after a while in return gets a constructed property, then in such a case the landowner's will be liable to pay GST on landowners share. And GST on flats given to landowner, the GST rate on such transfer is 18%. For instance, if the constructed property is valued at Rs. 10,00,000, the landowner is required to pay 18% Joint Development Agreement GST, i.e Rs. 1,80,000.
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Frequently Asked Questions
Is the JDA agreement taxable?
Yes, Joint Development Agreements (JDA) can be taxable under GST in India. The tax applies at different stages depending on the nature of the transaction within the JDA, such as transfer of development rights or sale of developed area.
What is the purpose of a joint development agreement?
A joint development agreement (JDA) is a contract between two or more parties outlining how they'll collaborate on developing a property or product. It defines how they'll share resources, responsibilities, and ultimately the profits or ownership of the finished project.
Is GST applicable on development of land?
GST isn't directly applicable to the simple act of land development itself (e.g., leveling, drainage). However, GST applies to services involved in developing land, like construction or laying utilities, at a rate of 18%.
What is the cost of joint development agreement?
The cost of a joint development agreement varies depending on complexity and lawyer experience, but typically ranges from a few hundred to several thousand dollars. For a cost-effective JDA, get quotes, be clear on your needs, and negotiate the lawyer's fee.
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