GST on development rights, TDR and FSI: what the promoter pays, and when

Short answer: development rights, TDR and FSI bought or received by a promoter are taxed under reverse charge — the promoter pays, not the supplier. For residential apartments the charge is exempt to the extent of units booked before the completion certificate, and what survives is capped at 1% or 5% of the unbooked units' value. For commercial space there is no exemption: 18% on all of it, sold or not. The liability on rights received against construction falls due at the completion certificate.

Why these sit outside the 80:20 test

The 80% registered-procurement condition covers the inputs and input services that go into a project. Development rights, TDR, FSI and long-term lease premiums are excluded from that computation because they are taxed under their own reverse-charge entry — putting them in the 80% working inflates or deflates the ratio depending on the year, and either way misstates it. See the 80:20 rule.

This note is the treatment those items carry instead.

Who pays

Under the reverse-charge notification, the following supplies to a promoter are taxed in the promoter's hands:

The supplier does not charge GST on the invoice. The promoter self-assesses, pays in cash, and takes credit where credit is available — which, for a residential project at 1% or 5%, it is not.

The exemption, and where it stops

For development rights, TDR or FSI used for constructing residential apartments, the supply is exempt to the extent of residential apartments booked before the completion certificate or first occupation, whichever is earlier.

What that leaves taxable:

• Residential apartments still unbooked at that date — the exemption attaches to booked units, so the unbooked share of the rights carries the charge.
• Commercial apartments — in full. There is no exemption for the development rights attributable to a commercial block, whether it sold out in the first month or not at all.

The residential portion is therefore a function of sales velocity. The commercial portion is a function of the project's design, fixed on the day the plan was sanctioned.

The cap on the residential portion

The tax on rights attributable to unbooked residential apartments cannot exceed what would have been payable had those apartments been sold: 1% for affordable housing, 5% otherwise, on the value of the unbooked units. That cap is why the exposure on a slow-selling residential project is contained, even though the rights themselves would otherwise be taxed at 18%.

There is no cap on the commercial portion. It is 18% on the value of the rights attributable to commercial space.

When it falls due

The promoter's liability on development rights or FSI received on or after 1 April 2019 for construction of a project arises on the completion certificate or first occupation, whichever is earlier — not on the agreement date, and not on payment. The notification that fixes that date is drafted widely: it covers consideration in the form of construction service of residential or commercial apartments, in cash, or in any other form. So the deferral reaches the commercial portion and a monetary purchase of FSI from an authority alike.

That is what allows the exemption to be computed on actual bookings rather than projected ones — and it is also why the whole charge lands on one date, alongside everything else that crystallises there.

How the value is fixed

The first is the same benchmark that values the landowner's construction service — see the landowner's share — and it is fixed to the transfer date, so a project whose prices rose after signature is valued at the earlier figure.

Both the value and the exemption turn on the project's residential to commercial split. On a mixed-use project that split, apartment by apartment, has to be settled before either number can be computed.

What to have ready before the certificate

1. The booking position — residential units booked, with dates, as at the expected certificate date.
2. The commercial carpet area as a share of the project, because that share of the rights is taxable regardless.
3. The transfer date of the development rights, and the prices charged to independent buyers nearest to it.
4. For TDR or FSI bought for money — the purchase documents and the dates of payment.
5. Cash for the reverse charge, because on a residential project there is no credit to set it against.

What else lands on the same date is in unsold inventory at the completion certificate. The whole transaction, both taxes, is in how income tax and GST apply to a JDA.

The cap on development-rights tax is computed by reference to the rate on the unbooked units, so it inherits the project's classification — set out in RREP or REP.

This is a working reference, not the statute. For anything you are relying on, confirm the notification entries and their current numbering directly.