Smart TVs, Digital Advertising and Cross-Border GST: Separate the Hardware from the Platform

By CA Mithilesh Reddy, Founder and CEO, and CA Rupesh Reddy, Steadfast Business Consulting LLP | Indirect Tax Advisory

Introduction

A connected television is sold as hardware, but it also sits within a continuing commercial ecosystem. Manufacturers, importers, operating-system owners, advertising platforms, content licensors, measurement providers and distributors may all earn revenue after the device is sold. Tax analysis built solely around the sale of the television misses most of that structure.

The practical problem is that connected-TV businesses do not supply one composite service merely because all revenues depend on the same screen. Import of devices, licensing of software, grant of advertising rights, campaign-management services, data analytics and settlement of revenue shares are capable of having different suppliers, recipients, places of supply and GST consequences.

This article sets out a transaction-first framework for mapping that ecosystem. It concentrates on the drafting and evidence choices required before agreements are executed, when the group can still separate the commercial rights clearly.

1. Begin with four maps, not an organisation chart

An ownership diagram shows which group company holds an entity, but not who supplies hardware, licensed rights or advertising inventory. Prepare four maps: physical movement of devices; ownership and use of operating-system or content IP; performance of advertising and analytics services; and payment and settlement routes.

The maps should identify each legal counterparty, contract, invoice, source of income and responsibility for performance. Tax positions that are correct under one flow can fail if the invoices and agreements implement a different flow.

2. Importation of television hardware

Customs value, applicable classification, import duties and import IGST depend on the goods actually imported and the relevant customs rules. Whether embedded software, licences or associated consideration must be examined for customs valuation is a fact- and instrument-specific question.

Do not add all subsequent platform revenue to imported-goods value, nor presume that no rights payment can ever be relevant. The contractual condition of sale, commercial relationship and valuation rules must be analysed using the import documentation and rights agreements.

3. Who supplies the advertising inventory?

An advertising group may sell ad slots on a connected-TV home screen, provide campaign placement services, supply analytics or merely arrange transactions between a brand and an overseas platform owner. Each structure affects the supplier and recipient determination under GST.

If an Indian company buys and resells advertising inventory on its own account, that differs from arranging an advertisement supplied by a foreign principal. The intermediary versus principal distinction should be established from contract rights, price-setting power and obligation to deliver the advertising. For supplies on or after 30 March 2026 the distinction no longer changes the place of supply of a cross-border service, because section 13(8)(b) of the IGST Act has been omitted by the Finance Act 2026, but it still matters for earlier periods and for the value on which tax is charged.

4. Digital services and OIDAR are not universal labels

Online information and database access or retrieval services are subject to specific definitions and rules. The fact that a service is delivered over the internet does not automatically bring every advertising, development, management or creative service into that category.

Identify whether the service is delivered over the internet or an electronic network and could not be supplied without information technology, who receives it, and whether a specific location or registration provision applies. Since 1 October 2023 the definition no longer requires the service to be essentially automated with minimal human intervention, and any unregistered recipient in India is a non-taxable online recipient. Digital advertising campaigns that include material bespoke work may require a more nuanced classification than standard platform access.

5. Place of supply should follow the actual contract

For cross-border services, section 13 of the IGST Act applies where the supplier or the recipient is outside India: the general rule in section 13(2) places the supply at the recipient’s location, and the exceptions (performance-based services, immovable property, events, online information and database access) sit in the other sub-sections. Where both parties are in India, section 12 applies instead. Depending on the nature of the supply, location of the recipient, physical performance or another statutory factor may be relevant. A foreign invoice address does not, by itself, prove a service is exported.

When a foreign platform charges an Indian entity, determine whether import-of-service conditions and reverse charge obligations are met. Where an Indian supplier bills overseas group companies, independently test all export-of-services conditions, including the recipient’s location and permitted receipt of payment.

6. Software rights and income-tax characterisation should align

GST classification and direct-tax treaty characterisation serve different legal purposes, but the underlying rights must be described consistently. Distinguish access to software or data from transfer of reproduction, adaptation or commercial exploitation rights.

Contracts should define licensed territory, access controls, sublicensing rights, permitted modifications and ownership of user data or advertising analytics. A generic “technology fee” invoice makes it harder to defend the substance in both withholding and indirect-tax reviews.

7. Advertising revenue shares and foreign exchange settlement

Revenue-sharing agreements should identify the original customer transaction, gross consideration, commissions, refunds, taxes, settlement currency and entity entitled to each amount. A revenue share is not necessarily the same as an agency commission or purchase of services.

Where balances are netted among group entities, analyse foreign exchange rules and maintain a reconciliation of settlement. Transfer pricing should also reflect which party controls monetisation, owns valuable platform rights and assumes advertising fill-rate or customer risk.

8. Input tax credit and allocation of common costs

An importer or domestic seller of devices may have credit on import IGST, logistics and other business inputs, subject to GST conditions. Platform-related services may support taxable, zero-rated, exempt or mixed activities. Eligibility and apportionment cannot be decided without examining the actual output supplies.

Maintain cost centres separating hardware, platform licences, domestic advertising, overseas supplies and shared overheads. An ERP mapped exclusively to hardware turnover can distort the input credit allocation for an increasingly service-driven business.

9. Build a contract pack that is tax-complete

Before commercial launch, review the purchase and distribution agreements, OS or IP licences, advertising inventory terms, revenue-share schedules, campaign-management agreements, data-processing clauses and settlement mechanisms as one package.

A practical sign-off matrix should record the supplier, recipient, description, location, GST treatment, import treatment if relevant, direct-tax withholding, TP policy, invoice owner and evidence needed. Changes to rights and funds flows should trigger an update to the matrix instead of a unilateral invoicing workaround.

Customs valuation of imported televisions and embedded software: the tests to run

For imported goods the value for customs duty is the transaction value under section 14(1) of the Customs Act, 1962, determined under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Where buyer and seller are related, Rule 3(3) allows the declared price to be accepted if the relationship did not influence it, or if the price closely approximates a test value, so a group importer should keep its transfer pricing evidence and its customs evidence side by side and make sure they tell the same story.

Payments outside the invoice price are added only on the tests in Rule 10(1). A royalty or licence fee is added under Rule 10(1)(c) if it relates to the goods being valued and the buyer must pay it, directly or indirectly, as a condition of the sale of those goods. Rule 10(1)(e) similarly reaches other payments made as a condition of sale. A fee for the operating system loaded on the device at import may therefore be addable if the importer cannot buy the television without taking the licence. A fee for platform rights used only after import, such as hosting an advertising marketplace in India, is not automatically addable. The Supreme Court’s decision in Commissioner of Customs v Ferodo India, decided under the corresponding 1988 Rules, illustrates the approach: royalties tied to manufacture in India rather than to the imported goods were not added to assessable value.

Where televisions arrive as unassembled or semi-assembled kits, classification follows the General Rules for the Interpretation of the Customs Tariff, under which a heading extends to an incomplete or unassembled article that has the essential character of the complete article. The valuation file should show what software is loaded at import, what is downloaded later, and which agreement governs each.

Advertising services: supplier, recipient and place of supply

Three fact patterns recur. In the first, an overseas platform owner sells advertising inventory to an Indian brand or agency. Under section 13(2) of the IGST Act the place of supply is the recipient’s location in India. A registered Indian recipient pays IGST under reverse charge under Notification 10/2017-Integrated Tax (Rate) and may claim credit subject to section 16 of the CGST Act. If the service is online information and database access or retrieval and the Indian buyer is unregistered, the overseas supplier itself must register and pay tax under section 14.

In the second, an Indian company sells campaign management or advertising space to an overseas group company. The place of supply is the recipient’s location outside India, but zero rating needs every condition in section 2(6): supplier in India, recipient outside India, place of supply outside India, payment in convertible foreign exchange (or in rupees where the Reserve Bank permits), and supplier and recipient not merely establishments of a distinct person. Settlement through netting or a third group entity is where this most often fails.

In the third, an Indian entity arranges transactions between an advertiser and a foreign platform for a commission. For periods before 30 March 2026 the section 2(13) intermediary test, read with Circular 159/15/2021-GST, decided whether the place of supply was the supplier’s location. Section 13(8)(b) has since been omitted by the Finance Act 2026, so the recipient-location rule applies either way, but the characterisation still decides whether the taxable value is the gross price of the advertising or the commission earned.

A launch checklist for a connected-TV group

Before launch, assemble one file that follows each flow from contract to invoice to payment. For the goods flow, keep the supply and distribution agreements, the commercial invoices, the licence agreements for any embedded software and a short note on classification and valuation. For the rights flow, keep the operating system and content licences with the territory, sublicensing and data ownership terms. For the services flow, keep insertion orders, rate cards and campaign reports showing who contracted with the advertiser and who delivered the advertising. For the payment flow, keep the settlement statements, bank advices and any netting reconciliation.

Then add a sign-off matrix recording, for each contract, the supplier, recipient and their locations, the GST and customs treatment, the withholding position and the evidence held. Re-run the matrix whenever rights or funds flows change, and when the law changes, as it did for intermediary services in March 2026 and for online information and database access services in October 2023.

Conclusion

The complexity of a connected-TV business lies less in the technology than in the number of distinct rights and services monetised through the same device. It is a mistake to tax the whole ecosystem as though it were a single television transaction.

A clear transaction map allows customs, GST, income-tax withholding and transfer pricing analyses to follow the same commercial facts, even where their legal consequences differ. That is a more durable foundation than attempting to repair the tax position after the platform is operational.

Frequently asked questions

1. Are all revenue streams from a smart television sales of goods?

No. Rights and services supplied after device sale may be separate transactions.

2. Is all digital advertising automatically OIDAR?

No. The statutory definition and actual service model must be applied.

3. Does an overseas invoicing entity automatically make the supply an export?

No. The statutory export-of-services conditions must all be examined.

4. Can software licence payments affect customs valuation?

They may in particular circumstances. The rights, condition-of-sale terms and valuation law require review.

5. Why should GST and transfer pricing teams coordinate?

They should describe the same functions, rights and risks even though the valuation and tax rules differ.

6. Is GST payable on advertising services bought by an Indian company from an overseas platform?

Yes, usually. The place of supply is the Indian recipient’s location under section 13(2) of the IGST Act, and a registered Indian recipient pays IGST under reverse charge under Notification 10/2017-Integrated Tax (Rate). Credit can be claimed if the advertising is used for business and section 16 of the CGST Act is satisfied.

7. What is the place of supply for advertising services an Indian company provides to an overseas group company?

The IGST Act has no separate rule for advertising, so section 13(2) places the supply at the recipient’s location. If that is outside India, the supply is an export of services only if all conditions in section 2(6) are met, including payment in convertible foreign exchange and the parties not being merely establishments of a distinct person.

8. Is a software licence fee added to the customs value of imported televisions?

Only if it meets Rule 10(1)(c) of the Customs Valuation Rules, 2007: the royalty or licence fee must relate to the imported goods and be payable by the buyer, directly or indirectly, as a condition of their sale. Payments for rights used after import, unconnected with the sale of the goods, are not automatically added.

9. Does the omission of section 13(8)(b) matter for advertising agencies acting as intermediaries?

Yes. Section 157 of the Finance Act 2026 omitted section 13(8)(b) of the IGST Act, so cross-border intermediary services follow the recipient-location rule in section 13(2). Commentary reads this as effective from 30 March 2026. Intermediary status still affects valuation, and earlier periods remain governed by the old rule.

Related reading from SBC

• Intermediary or Principal? How Section 2(13) IGST Decides Zero Rating of Service Exports
• Digital Platforms and India Tax Once the Equalisation Levy Is Gone: SEP, Treaty and PE Compared
• Defending the Residual Profit Split Method in India When the TPO Proposes TNMM for an Intangible-Owning Entity
• More articles on the SBC blog

Disclaimer

This article is general professional commentary and not advice on any particular facts. Treaty eligibility, applicable law, procedural requirements and statutory amendments must be verified for the relevant tax period. It is not a description of an identifiable client engagement.

Place of Supply for an Event Held Outside India

By CA Mithilesh Reddy, Founder and CEO, and CA Rajesh Vaishnav, Partner, Steadfast Business Consulting LLP | Indirect Tax Advisory

Introduction

Place of supply determines whether Indian GST applies at all. For services it is governed by two separate provisions, one for supplies where both parties are in India and another for supplies where either is outside it, and the two do not always give the same answer on the same facts. Events have their own rules within each, which is sensible for an activity that happens at an identifiable place, and awkward for an event whose vendors, sponsors, broadcasters and delegates are spread across several countries.

The rule that sources event services to the place the event is held is clear enough in itself. The error is applying it in one stroke to every invoice connected with the event. An international summit involves production and venue services, broadcast and media coverage, sponsorship administration, delegate travel arrangements and sometimes digital services supplied to participants who never travel. Not all of those are services supplied in relation to the event in the sense the provision contemplates, and each has to be tested on its own. The consequence of getting it wrong runs in both directions: tax paid on services outside the charge is an unrecoverable cost, and tax not paid on services within it is a demand with interest.

This note deals with an event held outside India and the supplies that surround it. It covers which of the two provisions applies and why that is decided by the location of the parties rather than the venue, a service by service analysis across production, media, sponsorship and delegate facing supplies, the position of an Indian sponsor, hybrid and digital participation, the export conditions where they apply, and the documentation that has to be assembled during the event rather than afterwards. For the related classification question that decides whether a cross border service is an export at all, see our note on intermediary or principal under section 2(13).

1. Which provision applies

The analysis begins with the location of the parties rather than with the nature of the service.

Section 12 of the IGST Act applies where both the supplier and the recipient are located in India. Section 13 applies where either is outside India. A single event will frequently involve both: an Indian production company engaged by an Indian organiser falls under section 12, while the same production company engaged by an overseas entity falls under section 13. The same physical activity in the same venue produces different place of supply outcomes depending on who contracted with whom.

The two provisions also differ in substance on events, and the difference is easy to miss.

Under section 12, admission to an event under section 12(6) is placed where the event is actually held. Organisation of an event under section 12(7) turns on the status of the recipient. Where the recipient is a registered person, sub-clause (i) places the supply at the location of that person, and the location of the event is irrelevant. Where the recipient is not registered, sub-clause (ii) places the supply where the event is actually held, and it is only within that sub-clause that the further rule appears: if the event is held outside India, the place of supply is the location of the recipient. The overseas event rule therefore applies only to unregistered recipients. Where an event spans more than one state and a consolidated amount is charged, the supply is apportioned.

Under section 13(5), services by way of admission to or organisation of such an event, and services ancillary to such admission or organisation, are placed where the event is actually held, without the distinction between registered and unregistered recipients.

That difference matters directly for an Indian organiser holding an event abroad. Where the Indian organiser engages an Indian supplier, both are in India and section 12(7) applies. The organiser is a registered person, so sub-clause (i) places the supply at its own location in India, and the fact that the event is held abroad makes no difference to that result. Where the Indian organiser engages an overseas supplier, or supplies its own services to an overseas recipient, section 13(5) applies instead and the place of supply is the venue.

2. The service by service analysis

The categories below reflect how a typical international summit resolves. The reasoning matters more than the labels, because the answer depends on what the service actually is rather than on what the invoice calls it.

Event management, production and venue coordination. These are the core organisation services and, where section 13 applies, they are placed where the event is held. Where the event is in Dubai, they are outside the Indian charge. The supporting evidence is the venue contract, the production schedule and the deliverables, all of which locate the activity.

Services ancillary to organisation. Section 13(5) expressly extends to services ancillary to admission or organisation. Staging, audio visual, security, on site logistics and hospitality at the venue fall here on ordinary principles. The ancillary character should be demonstrated by reference to the venue and the event rather than assumed.

Media coverage and broadcasting. This is the category that most often needs separate analysis. Where a broadcaster films the event at the venue, the service is closely connected to the event. Where a service is the transmission of a signal, the provision of satellite bandwidth, or the licensing of footage for later use, the supply is not naturally described as organisation of the event or as ancillary to it, and the default rule in section 13(2), placing the supply at the recipient’s location, may be the better fit. A single media contract frequently contains both, and it should be unbundled before it is characterised.

Sponsorship. Where both parties are in India, section 12(7) expressly covers the assigning of sponsorship to an event and applies the recipient-based rule described above. Section 13(5) does not mention sponsorship, so for a cross-border sponsorship the default rule in section 13(2) is the starting point, and the analysis follows the recipient and the nature of the rights granted. Where an Indian sponsor acquires rights, the supply to it is not automatically outside India merely because the event is abroad. Sponsorship arrangements also frequently include a package of deliverables, such as branding at the venue, digital promotion, hospitality and a speaking slot, and the package should be examined rather than treated as a single undifferentiated right.

Delegate facing services. Registration, accommodation booking and travel arrangements are separate supplies with their own rules, and they are commonly invoiced by the organiser as part of a delegate fee. Where they are, the composite supply analysis under sections 2(30) and 8 has to be applied before the place of supply question is reached.

Digital participation. Where the event is streamed, or where remote participants access content, the supply to those participants is not a supply of admission to an event held at a place. It requires its own analysis, and for an overseas supplier delivering to unregistered Indian recipients the online information and database access provisions may be engaged.

3. Export, where it applies

Where an Indian supplier provides services to an overseas recipient and the place of supply is outside India, the next question is whether the supply qualifies as an export under section 2(6) of the IGST Act. All five conditions must hold: the supplier is in India; the recipient is outside India; the place of supply is outside India; payment is received in convertible foreign exchange, or in Indian rupees wherever permitted by the Reserve Bank; and the supplier and recipient are not merely establishments of a distinct person.

The fourth condition is a frequent point of failure in event work, because settlement is often routed through a group entity or set off against other balances. The fifth catches arrangements where the overseas organiser is a branch or establishment of the same Indian entity, in which case the supply is not an export however it is documented.

Where the supply is an export, zero rating under section 16 applies through the bond or letter of undertaking route, with refund of unutilised credit under section 54 of the CGST Act. Since the substitution of section 16(3) with effect from 1 October 2023 that is the general route, and the alternative of paying tax and claiming refund is available only to a notified class under section 16(4).

4. The documentation that makes the position defensible

A place of supply conclusion is only as good as the evidence that the service was what the analysis says it was. For an overseas event the file should contain the following, assembled during the event rather than afterwards.

• The venue contract, establishing where the event was held and over what dates.
• Vendor agreements that describe each service by reference to the event and the venue, rather than in generic terms.
• Invoices that describe the service specifically and identify the event. An invoice reading “professional services” supports nothing.
• The event programme and run sheet, which evidences what was actually delivered at the venue.
• Evidence of performance at the venue: crew lists, equipment manifests, site photographs, delivery notes.
• For media contracts, an unbundled scope distinguishing on site coverage from transmission and from any licensing of footage.
• For sponsorship, the rights schedule setting out each deliverable.
• Where export is claimed, the foreign inward remittance evidence and the letter of undertaking.
• A dated positions note recording the characterisation of each category and the provision relied on.

5. A worked example

An Indian organiser holds a multi-day international conference at a venue in the Gulf. It engages Indian and overseas vendors, broadcasts parts of the summit, and sells sponsorship packages to Indian and overseas sponsors. Delegate fees cover admission, accommodation and transfers.

Production and venue services supplied by overseas vendors to the Indian organiser. Section 13 applies because the supplier is outside India. Under section 13(5) the place of supply is Dubai, so these are outside the Indian charge and no reverse charge arises on them.

Production services supplied by Indian vendors to the Indian organiser. Both parties are in India, so section 12 applies. The organiser is a registered person, so under section 12(7)(i) the place of supply is its own location in India and these supplies are taxable in India. The location of the event does not enter the analysis. This is the result that surprises organisers most often, and the reason matters: it is the organiser’s registration, not the venue, that fixes the place of supply.

The organiser’s own services to overseas sponsors and participants. Section 13 applies. Organisation and ancillary services are placed at the venue under section 13(5). Where the supply qualifies as an export under section 2(6), zero rating applies subject to the consideration and distinct person conditions.

Broadcast. The media contract is unbundled. On site filming is treated as ancillary to the organisation of the event. Signal transmission and footage licensing are analysed separately, with the default rule in section 13(2) considered for those elements.

Sponsorship. The rights schedule is examined. Branding at the venue is treated differently from a digital promotion campaign delivered to an Indian audience, and the analysis follows the recipient and the rights rather than the location of the summit.

Delegate fees. Where admission, accommodation and transfers are supplied for a single price, the composite supply analysis under sections 2(30) and 8 is applied first to identify the principal supply, and the place of supply follows that characterisation.

6. The Indian sponsor, looked at from the other side

Most analyses of a cross border event are written from the organiser’s side. The sponsor’s position is a separate question and it is frequently left unanswered until an audit raises it.

Where an Indian sponsor pays an Indian organiser for a package of rights at an overseas event, both parties are in India and section 12 governs. Where the sponsor pays an overseas organiser, section 13 governs and the question is whether the package falls within the event rule or within the default rule for the recipient’s location. Where the place of supply is in India and the supplier is outside India, the supply is an import of services on which the Indian sponsor discharges tax under reverse charge, with credit where it is otherwise eligible.

The analysis turns on what the sponsorship package actually contains, which is why the rights schedule matters. Branding displayed at the venue, a speaking slot at the event and hospitality at the venue sit close to the event. A digital campaign delivered to an audience in India, a logo on a website, and rights to use event footage in the sponsor’s own marketing for a year afterwards do not. A package that bundles all of these for a single fee requires the composite supply analysis before the place of supply analysis, and the answer may well be that the package is a mixed supply rather than a composite one.

7. Digital and hybrid participation

Few international events are now entirely physical, and the hybrid element does not follow the physical one.

A delegate who attends in Dubai is admitted to an event held at a place. A delegate who watches a stream from an office in Mumbai is not. The supply to the second delegate is not naturally described as admission to an event held outside India, and it requires its own analysis. Where the supplier is outside India and the recipient is an unregistered person in India, the online information and database access provisions may be engaged, with the compliance obligations that follow for the overseas supplier. Where the recipient is a registered person in India, reverse charge on an import of services is the more likely answer.

The practical step is to separate the fee. An event that offers physical attendance at one price and digital access at another has already done the work. An event that offers a single fee covering both has created a characterisation question it will have to answer later, and the easiest time to avoid it is when the pricing is set.

8. Documentation for a refund claim

Where the organiser is exporting services and accumulating credit, the place of supply analysis is only the first half of the exercise. The refund claim brings its own requirements, and refund officers test them independently of the characterisation.

The claim has to correlate the credit claimed with the export turnover, which means linking input invoices to the event and to the exported supply rather than offering an aggregate figure. It has to be computed in accordance with the prescribed formula, with the turnover of zero rated supply of services computed on the payments basis the formula requires rather than on invoiced value. And the letter of undertaking has to have been in place before the first zero rated supply, not obtained afterwards.

For an event business the correlation exercise is unusually awkward, because costs are incurred in a short window and across many vendors, and because some of those costs relate to supplies that are not zero rated. Building the correlation during the event, as invoices arrive, is materially easier than reconstructing it from a general ledger six months later.

9. Where these positions fail

First, one conclusion is applied to the whole event. This is the most common error, and it produces exposure in both directions.

Second, section 12 and section 13 are conflated. The two provisions give different answers for an event held abroad, and the applicable one depends on where the parties are, not on where the event is.

Third, invoices are generic. A description that does not identify the event or the service leaves nothing to support the characterisation.

Fourth, media contracts are not unbundled, so a single characterisation is applied to filming, transmission and licensing.

Fifth, sponsorship is assumed to follow the event location. It follows the recipient and the rights.

Sixth, the export conditions are not separately verified, particularly the receipt of consideration and the distinct person condition.

Seventh, the file is assembled after the event. The venue contract, run sheet, crew lists and site evidence exist only if someone kept them.

10. A pre event checklist

1. Map every contract, identifying the supplier, the recipient, the location of each and whether the recipient is registered, before deciding whether section 12 or section 13 applies to it.
2. Categorise each service as organisation, ancillary to organisation, media, sponsorship, delegate facing or digital.
3. Apply the correct provision to each category and record the conclusion with reasons.
4. Unbundle composite media and sponsorship contracts into their components before characterising them.
5. Specify invoice narration requirements for every vendor, so that invoices identify the event and the service.
6. Where supplies are composite, apply the composite supply analysis before the place of supply analysis.
7. For each export claim, verify all five conditions in section 2(6) separately, with evidence.
8. Confirm the letter of undertaking is in place before the first zero rated supply.
9. Assign responsibility for collecting venue evidence during the event.
10. Prepare a dated positions note before the event and update it if the scope changes.
11. Reconcile the final invoicing against the positions note after the event.
12. Diarise the refund claim timeline where credit accumulates.

Practitioner’s perspective

Cross border events are a growing part of what Indian media, broadcasting and professional services businesses do, and the indirect tax treatment is more variable than most organisers expect. The single most valuable thing an adviser can do is to insist that the analysis is conducted contract by contract, because the appealing simplicity of a single conclusion is precisely what creates the exposure.

The result that catches organisers repeatedly is worth stating plainly. Where an Indian organiser engages an Indian vendor for an event held abroad, both parties are in India and section 12(7) applies. Because the organiser is registered, sub-clause (i) places the supply at its location in India, and the venue is immaterial. The rule that sources an overseas event to the recipient’s location sits in sub-clause (ii) and is confined to unregistered recipients, which is a distinction worth holding on to, because it is the one most often misread. It is the supplies involving an overseas party that section 13(5) places at the venue.

Beyond that, this is a documentation discipline rather than a legal one. The position is defensible if the invoices say what the services were and the file shows where they were performed. Both are free to arrange before the event and impossible to arrange afterwards.

How sections 13(3), 13(4), 13(5), 13(6) and 13(8) fit together for an event

Section 13 of the IGST Act is a set of exceptions to the default rule in section 13(2), which places a supply at the recipient’s location. Several of those exceptions touch an event. Section 13(5) covers admission to and organisation of the event and ancillary services. Section 13(4) covers services directly related to immovable property, including hotel accommodation and the grant of rights to use immovable property, so a delegate’s hotel stay or the hire of the venue itself is located where the property is. Section 13(3)(b) covers services supplied to an individual that need the individual’s physical presence, such as a workshop delivered to a delegate, and places them where they are performed. Travel is separate again: passenger transportation is placed where the passenger boards the conveyance for a continuous journey under section 13(10).

Two provisions deal with events that do not sit in one place. Under section 13(6), where a service falling within section 13(3), 13(4) or 13(5) is supplied at more than one location, including a location in the taxable territory, the place of supply is the location in the taxable territory. Under section 13(7), where such a service is supplied in more than one State or Union territory, it is treated as supplied in each, with value apportioned on the contract or as prescribed. An event with sessions in India and abroad, or an international programme that ends with a session in an Indian city, should be tested against section 13(6) before the overseas venue conclusion is applied.

Two changes in the law should be kept in view. Section 13(8)(b), which placed intermediary services at the supplier’s location, was omitted by section 157 of the Finance Act 2026. Commentary reads the omission as effective on assent, 30 March 2026, and the definition of intermediary in section 2(13) is unchanged. An agent that sells sponsorship or delegate places on an organiser’s behalf is therefore tested against the default rule in section 13(2) for later periods, while earlier periods stay under the old rule. Separately, section 16(3) of the IGST Act was substituted with effect from 1 October 2023 (Notification 27/2023-Central Tax), making supply under bond or letter of undertaking the general zero rating route, and the Finance (No. 2) Act 2024 added a cross-reference to section 54 of the CGST Act in section 16(4). We found no 2024 amendment to the event rules in sections 12 or 13.

Frequently asked questions

1. Where is the place of supply for services relating to an event held outside India?

Where section 13 applies, because the supplier or the recipient is outside India, section 13(5) places services by way of admission to or organisation of the event, and services ancillary to them, at the place where the event is actually held. For an event in Dubai, that is outside India.

2. Does that mean everything connected with the event is outside Indian GST?

No. The rule applies to admission, organisation and ancillary services where section 13 governs. Other services connected with the event, and services where both parties are in India, are governed by different rules and may well be taxable in India.

3. What happens where an Indian organiser engages an Indian vendor for an overseas event?

Both parties are in India, so section 12 applies. The organiser is a registered person, so under section 12(7)(i) the place of supply is its own location in India and the supply is taxable in India. The venue is immaterial to that result. The rule sourcing an overseas event to the recipient’s location sits in section 12(7)(ii) and applies only where the recipient is not registered.

4. How should broadcast and media services be treated?

By unbundling the contract. On site filming at the venue is readily characterised as ancillary to the organisation of the event. Transmission of a signal, provision of bandwidth and licensing of footage are not naturally organisation services, and the default rule in section 13(2) should be considered for them.

5. Does sponsorship follow the event location?

Not automatically. Sponsorship is a grant of promotional rights, and the analysis follows the recipient and the nature of the rights rather than where the event is held. The rights schedule should be examined component by component.

6. How are delegate fees covering admission, accommodation and transfers treated?

Where they are supplied for a single price, the composite supply analysis under sections 2(30) and 8 applies first, to identify the principal supply. The place of supply then follows that characterisation.

7. What conditions must be met for the supply to be an export?

All five in section 2(6): supplier in India, recipient outside India, place of supply outside India, payment received in convertible foreign exchange or in Indian rupees where permitted by the Reserve Bank, and the supplier and recipient not merely establishments of a distinct person.

8. Which zero rating route is available?

Since the substitution of section 16(3) with effect from 1 October 2023 the general route is supply under bond or letter of undertaking without payment of tax, with refund of unutilised credit under section 54 of the CGST Act. The with payment route is available only to a notified class under section 16(4).

9. What documentation supports the position?

The venue contract, vendor agreements describing each service by reference to the event, invoices with specific narration, the event programme and run sheet, evidence of performance at the venue, unbundled scopes for media and sponsorship, remittance evidence where export is claimed, and a dated positions note.

10. What is the most common error?

Applying a single place of supply conclusion to every invoice connected with the event. The exposure runs in both directions: tax paid on supplies outside the charge is an unrecoverable cost, and tax not paid on supplies within it is a demand with interest.

11. What is the place of supply for sponsorship of an event under GST?

Where supplier and recipient are both in India, section 12(7) of the IGST Act expressly covers assigning of sponsorship to an event: a registered recipient’s location decides, and an unregistered recipient is placed at the venue, or at its own location if the event is abroad. Section 13(5) does not mention sponsorship, so a cross-border sponsorship starts from section 13(2), the recipient’s location.

12. Did the Finance Act 2026 change the place of supply for intermediary services connected with events?

Yes. Section 157 of the Finance Act 2026 omitted section 13(8)(b) of the IGST Act, which had placed intermediary services at the supplier’s location. Commentary reads the change as effective from assent on 30 March 2026. Cross-border intermediary services now follow the recipient-location rule in section 13(2). The definition in section 2(13) is unchanged.

13. Is a conference held partly in India and partly abroad taxed in India?

Section 13(6) of the IGST Act provides that where an event service is supplied at more than one location, including one in the taxable territory, the place of supply is the location in the taxable territory. A programme with any session in India therefore needs to be tested against that sub-section before treating the whole supply as sourced to the overseas venue.

14. Where is the place of supply for hotel accommodation booked for delegates at an overseas event?

Where the supplier or recipient is outside India, section 13(4) of the IGST Act places services directly related to immovable property, including accommodation by hotels, inns and guest houses, where the property is located. Hotel accommodation at an overseas venue therefore has a place of supply outside India, subject to the composite supply analysis if it is bundled into a delegate fee.

Related reading from SBC

• Intermediary or Principal? How Section 2(13) IGST Decides Zero Rating of Service Exports
• GST Export Refunds When Receivables Are Netted Against Overseas Payables
• Smart TVs, Digital Advertising and Cross-Border GST: Separate the Hardware from the Platform
• More articles on the SBC blog

Disclaimer

This article is for general information and does not constitute professional advice. It reflects the law as understood at the date of publication and does not take account of later developments. The place of supply for any service depends on the location of the parties, the nature of the service and the terms of the contract, and the analysis must be conducted supply by supply. No reader should act on the basis of this article without taking advice on their own circumstances.

Structuring a Joint Development Agreement for GST Before the Project Starts

By CA Mithilesh Reddy, Founder and CEO, and CA Rajesh Vaishnav, Partner, Steadfast Business Consulting LLP | Indirect Tax Advisory

Introduction

A joint development agreement is not one transaction. The landowner supplies development rights. The developer supplies construction services, often partly for money and partly for constructed apartments handed back. Units are then sold to buyers, some before completion and some after. Each of those legs has its own GST treatment, its own timing and its own valuation, and the legs interact: how much of the first is taxable depends on how many of the last were sold before the project completed.

Settling the treatment of each leg at structuring stage is not a compliance nicety. The timing provision determines whether a developer funds a material tax outflow at the start of a project or at the end of it, and the credit analysis determines the cost base of every unit sold.

This note deals with settling all of that at structuring stage, before the agreement is executed, rather than at the first audit. It covers the 2019 notification framework and the rate structure, when liability on the transfer of development rights crystallises and on whom, how much of that transfer is actually taxable given that the exemption is partial, how the landowner’s constructed units are valued, which input credits survive the residential restrictions, the eighty per cent procurement condition with a worked computation, and the credit reversal attributable to unsold inventory at completion.

1. The framework

Six notifications dated 29 March 2019, effective from 1 April 2019, together make up the regime.

Notification	Effect
03/2019-Central Tax (Rate)	Amends the principal rate notification to insert the new real estate rate entries, with the annexures governing transitional credit for ongoing projects.
04/2019-Central Tax (Rate)	Amends the exemption notification to exempt transfer of development rights, floor space index and long term lease, to the extent attributable to residential apartments booked before completion.
05/2019-Central Tax (Rate)	Amends the reverse charge notification to insert entry 5B, covering transfer of development rights or floor space index for construction of a project by a promoter, and entry 5C, covering a long term lease of land of thirty years or more against upfront consideration. Both are payable by the promoter.
06/2019-Central Tax (Rate)	Issued under section 148, notifies promoters receiving development rights, floor space index or a long term lease as a class of registered persons and fixes the time of supply.
07/2019-Central Tax (Rate)	Notifies the supplies attracting reverse charge where the eighty per cent procurement condition is not met, and the cement mechanism.
08/2019-Central Tax (Rate)	Amends the goods rate notification 1/2017 for the real estate sector. The reverse charge on shortfall inputs, cement and capital goods is notified separately in 07/2019.

The rate structure introduced by notification 03/2019 is 0.75 per cent central tax for affordable residential apartments and 3.75 per cent for other residential apartments and for commercial apartments in a residential real estate project, each with the matching state tax. These are headline rates of 1.5 per cent and 7.5 per cent; because land is deemed to be one third of the total amount charged and is excluded from the taxable value, the effective rates are one per cent and five per cent of the total consideration. Both are without input tax credit and payable in cash. Ongoing projects could elect, by 10 May 2019, to continue at the earlier rates with credit.

The eighty per cent condition requires that at least eighty per cent of inputs and input services be procured from registered suppliers, excluding development rights, long term lease of land, floor space index, electricity, high speed diesel, motor spirit and natural gas from the computation. The shortfall is taxed at eighteen per cent under reverse charge in the promoter’s hands, payable by June following the end of the financial year. Cement procured from an unregistered supplier attracts reverse charge at the applicable rate irrespective of the eighty per cent threshold.

2. Question one: when does liability on development rights arise

This is the provision that most affects project cash flow, and it is the reason the framework is workable at all.

Notification No. 06/2019-Central Tax (Rate), issued under section 148, notifies registered promoters who receive development rights or floor space index on or after 1 April 2019 against consideration in the form of construction services or otherwise, and promoters who receive a long term lease of land for residential apartments against upfront premium, as a class of registered persons in whose case the liability to pay tax arises on the date of issuance of the completion certificate by the competent authority, or on first occupation of the project, whichever is earlier.

Three consequences follow for a developer.

For the supplies covered by notification 06/2019, the tax on development rights is not payable when the agreement is executed, nor when construction begins, nor when units are sold. It is payable at the end of the project. The deferral covers consideration paid as construction service and monetary consideration relatable to residential apartments; cash consideration for a commercial component is not deferred in the same way and has to be analysed separately. A developer that provides for it at signing is funding a liability that has not arisen.

The liability sits on the promoter under reverse charge by virtue of entry 5B inserted by notification 05/2019, not on the landowner. For a landowner who is an individual not otherwise registered, that is a material point and should be recorded in the agreement so that neither party later assumes the other is accounting for it.

Because the trigger is the completion certificate or first occupation, the project needs a protocol for identifying and documenting that date. First occupation in particular is a question of fact, and a developer that cannot evidence it is exposed on the timing of its own liability.

3. Question two: how much is taxable

Notification 04/2019 exempts the transfer of development rights, floor space index and long term lease to the extent attributable to residential apartments booked before completion. The exemption is partial and proportionate, and the proportion is not known until the end of the project.

That produces a computation that has to be run at the trigger date. The taxable portion corresponds to the residential apartments that remain unbooked as at the completion certificate or first occupation date, together with the commercial portion, for which the exemption does not apply in the same way.

The practical implication is that the eventual liability on development rights depends on sales performance, and a project that sells well before completion has a materially lower liability than one that does not. For a developer modelling a project, this should be in the cash flow as a range rather than as a fixed number, with the drivers identified. The proviso to entry 41A also caps the tax on the unbooked residential share at 0.5 per cent central tax for affordable apartments and 2.5 per cent for other residential apartments (one and five per cent including state tax) of the value of those apartments, so the range has a ceiling.

4. Question three: valuing the landowner’s constructed units

Where the developer gives the landowner constructed apartments as consideration for the development rights, the developer has supplied construction services and received non monetary consideration. Value is determined under section 15 of the CGST Act and the valuation rules, and for development rights acquired against apartments the 2019 notifications deem the value to be the amount the promoter charged for similar apartments to independent buyers nearest to the date on which the development rights are transferred.

Three points matter in the drafting.

Identify the reference transaction. The agreement should record how the value of the landowner’s share will be determined and against which comparable sales. Leaving it to be worked out years later, from a price list that has changed many times, is how valuation disputes start.

Fix the area allocation precisely. The landowner’s entitlement should be specified in carpet area terms, by unit where possible, with the mechanism for substitution if a unit becomes unavailable. Area definitions should follow the statutory definition rather than a local convention.

Record who bears the tax. The agreement should state expressly which party bears the tax on the development rights and which bears the tax on the construction service provided to the landowner. Silence on this point produces a dispute between the parties in addition to the dispute with the department.

5. Question four: which credits survive

Qualifying residential construction taxed under the post-2019 one per cent or five per cent effective rate generally does not carry input tax credit; transitional projects and other supplies must be reviewed under their own applicable entries and conditions. That is the defining commercial feature of the regime and it shapes procurement, because credit that cannot be taken becomes cost.

Where a project has both residential and commercial components, or where an ongoing project elected to continue under the earlier rates with credit, apportionment becomes necessary. Rules 42 and 43 of the CGST Rules, as amended by Notification No. 16/2019-Central Tax with effect from 1 April 2019, contain the real estate machinery. The ratio is computed per project on a carpet area basis rather than on turnover, and the exempt element includes apartments that remain unbooked as at the completion certificate or first occupation date. A final computation is required, with reversal and interest or re-credit as the case may be.

Rule 43 treatment of capital goods must be assessed in the context of the relevant credit regime and transitional provisions; it must not be applied mechanically to a project under the post-2019 no-ITC residential rate.

The planning point is that the reversal attributable to unsold inventory at completion is a real and often large number, it is driven by sales performance, and it should be modelled from the outset rather than discovered at the end of the project.

6. A worked example

A developer enters into a joint development agreement with landowners for a residential project. The landowners contribute development rights; the developer constructs and markets; the landowners receive a specified number of constructed apartments plus a monetary element.

Development rights. Liability arises under entry 5B on reverse charge in the developer’s hands, at the completion certificate or first occupation, whichever is earlier. The exemption in notification 04/2019 applies to the extent attributable to residential apartments booked before completion, so the taxable base is a function of unsold inventory at that date. The cash flow model carries a range, not a point estimate.

Landowner’s units. The construction service supplied to the landowners is valued by reference to the price charged to independent buyers for similar apartments nearest the date of transfer of the development rights. The agreement records the mechanism and the comparable set.

Procurement. The eighty per cent condition is monitored from the first procurement rather than computed at year end. Cement is tracked separately because it attracts reverse charge from an unregistered supplier regardless of the threshold. A register of registered and unregistered procurement, by value, is maintained monthly.

Credit. Under the one per cent and five per cent regime no credit is taken, and the procurement strategy reflects that credit is cost. Where an eligible or transitional component falls outside the no-credit regime, the relevant Rule 42 or Rule 43 methodology and any special project-level computation must be considered separately.

Documentation. A dated file records each position taken, the provision relied on, and the computation. That file is what answers the audit three years later, and it cannot be reconstructed.

7. The eighty per cent condition, in figures

The shortfall mechanism is widely misunderstood, so a short illustration helps. Suppose a project incurs the following during a financial year, in crore, excluding the items the computation leaves out.

Procurement	Amount
From registered suppliers	72
From unregistered suppliers	28
Total inputs and input services in the computation	100

Registered procurement is 72 per cent against a requirement of 80 per cent, so there is a shortfall of 8. That shortfall is taxed at eighteen per cent under reverse charge in the promoter’s hands, giving a liability of 1.44, payable by June following the end of the financial year.

Two points follow. First, the charge is on the shortfall, not on the whole of the unregistered procurement, so a project at 72 per cent pays on 8 rather than on 28. Second, cement sits outside this arithmetic entirely: cement procured from an unregistered supplier attracts reverse charge at the applicable rate whether or not the eighty per cent threshold is met, so cement procurement has to be tracked and taxed separately and is not available to cure a shortfall elsewhere.

The practical consequence is that the condition has to be monitored during the year. A project that discovers in April that it finished at 72 per cent can do nothing about it. A project that sees in October that it is tracking at 74 per cent can change its procurement.

8. Ongoing projects and the transitional computation

The regime distinguishes between projects that commenced on or after 1 April 2019, which are compulsorily within the new structure, and ongoing projects, which could elect by 10 May 2019 to continue at the earlier rates with input tax credit. The election was exercisable separately for each project, and a developer with several projects may therefore be operating under both regimes at once.

For a project that moved to the new structure, Annexures I and II to the principal amending notification govern the transitional credit computation, under which credit attributable to the portion of the project completed before the changeover is determined and the balance is reversed. A developer running both regimes needs to keep the computations and the credit ledgers for each project genuinely separate, because the apportionment machinery operates per project and a consolidated approach cannot be reconciled afterwards.

9. Carpet area, which decides more than it appears to

Carpet area carries three separate consequences and it is frequently computed on an internal convention rather than the statutory definition.

It determines whether an apartment is affordable, and therefore whether the one per cent or the five per cent rate applies, in combination with the value threshold. It is the basis on which the landowner’s entitlement under the agreement is usually expressed, and therefore the basis of the valuation of the construction service supplied to the landowner. And it is the basis of the apportionment ratio in Rules 42 and 43 for a real estate project, where the exempt element is computed on the carpet area of unbooked apartments at completion rather than on turnover.

A single inconsistency in how carpet area is measured therefore propagates into the rate, the valuation and the credit reversal. It is worth settling the definition once, in writing, at the start of the project, and applying it everywhere.

10. Where these projects go wrong

First, the liability on development rights is accrued at signing. The timing provision defers it to completion, and accruing early distorts the project economics and the tax provision.

Second, the completion certificate or first occupation date is not documented. Both are factual, and first occupation in particular needs an evidenced position.

Third, the eighty per cent condition is computed once, at year end, and the shortfall is a surprise. It should be monitored monthly, because by year end nothing can be done about it.

Fourth, cement is treated as part of the eighty per cent computation rather than as a separate reverse charge obligation.

Fifth, the valuation of the landowner’s units is left to be determined later. The comparable prices available at the relevant date are the ones that matter, and they are hard to reconstruct.

Sixth, the agreement is silent on who bears the tax. This produces a commercial dispute on top of the tax question.

Seventh, the credit reversal attributable to unsold inventory is not modelled, so a project that sells slowly produces an unbudgeted charge at completion.

Eighth, carpet area is computed on an internal convention rather than the statutory definition, which affects both the rate entry for affordable apartments and the Rules 42 and 43 ratio.

11. A structuring checklist

1. Classify the project and each apartment against the affordable and other residential definitions, using the statutory carpet area and value thresholds.
2. Confirm whether the project is new or ongoing, and for an ongoing project whether the election was made.
3. Record in the agreement that the liability on development rights is on the promoter under reverse charge and arises at completion or first occupation.
4. Specify the landowner’s entitlement in carpet area, by unit, with a substitution mechanism.
5. Record the valuation mechanism for the landowner’s units and the comparable set to be used.
6. State expressly which party bears each tax.
7. Set up monthly monitoring of the eighty per cent procurement condition, with cement tracked separately.
8. Model the development rights liability as a range driven by pre completion bookings.
9. Model the credit position, including any Rules 42 and 43 apportionment on a carpet area basis and the reversal attributable to unsold inventory.
10. Establish a protocol for identifying and evidencing the completion certificate and first occupation dates.
11. Maintain a dated positions file recording each conclusion and the provision relied on.
12. Review the position at each project milestone rather than treating the structuring note as final.

Practitioner’s perspective

Joint development agreements are among the most technically demanding transactions under GST, and the difficulty is less in the law than in the sequencing. Almost every question that generates a dispute at audit is one that could have been settled, cheaply, in the agreement.

The timing provision in notification 06/2019 is the most commercially significant feature of the regime and the most frequently misapplied. Deferring the liability on development rights to completion or first occupation is a substantial cash flow benefit, and a developer that provides for the tax at signing is giving it up for no reason.

The other point worth emphasising is that the eventual liability and the eventual credit reversal are both functions of how much of the project is sold before completion. That makes them commercial variables, not fixed compliance costs, and they belong in the project model from the first appraisal rather than in a tax computation at the end.

Development rights supplied before 1 April 2019: Notification 4/2018 and the transition

The March 2019 framework applies to development rights, floor space index and long term leases received on or after 1 April 2019. Earlier supplies sit under a different regime. Notification No. 4/2018-Central Tax (Rate), issued on 25 January 2018 under section 148 of the CGST Act, fixed the time of supply for development rights granted against construction service: the liability arises when the developer transfers possession or rights in the constructed property to the person who supplied the development rights, through a conveyance deed or an instrument such as an allotment letter. Notification No. 23/2019-Central Tax (Rate), dated 30 September 2019 and effective from 1 October 2019, added an explanation that Notification 4/2018 does not apply to development rights supplied on or after 1 April 2019, so the two regimes do not overlap.

For a developer with several projects the date on which the development rights were first transferred therefore decides which regime applies, and that date has to be evidenced from the agreement, any registered deed or power of attorney and the related correspondence. The Tax Research Unit’s real estate FAQs of May 2019 also record that the exemption for development rights is available only for rights transferred on or after 1 April 2019. Commentary on the 2019 changes describes earlier transfers as taxable at 18 per cent with input tax credit.

Whether the transfer of development rights under a joint development agreement is a taxable service at all remains contested in the courts. The Telangana High Court upheld the levy in February 2024, and the Patna High Court in May 2025 declined to interfere with a reverse charge demand on construction service supplied against development rights. A Division Bench of the Bombay High Court in 2025 quashed a show cause notice on the footing that entry 5B reaches only a transfer of TDR or FSI as understood under the local development control regulations, not rights obtained under a private development agreement. Related questions are before the Supreme Court, and the GST Council has had the taxation of joint development agreements before a Group of Ministers. A developer should record both the character of the rights and the timing position, and revisit them as the law settles.

What counts as a booked apartment, and why it matters

The share of development rights that escapes tax, and the share of credit that is treated as attributable to exempt supply, both turn on whether an apartment was booked by the completion certificate or first occupation date. The 2019 notifications and Rules 42 and 43 define a booked apartment by three tests that must all be met by that date: at least part of the construction service has a time of supply on or before the date; at least one instalment has been credited to the registered person’s bank account; and an allotment letter, agreement for sale or similar document has been issued. A booking that exists only in a sales register, or one supported by a token paid in cash that never reached the bank, will not count.

Notification 06/2019 also deals with the other leg of an area-sharing arrangement. The construction service the promoter supplies to the landowner against development rights is brought within the same completion certificate or first occupation timing, so both legs of the swap crystallise on the same date and should be valued, documented and reconciled together. Because the value of unbooked apartments is taken at the price of similar apartments sold nearest to the completion certificate or first occupation date, the pricing history of the project becomes evidence in its own right and should be kept in a form that an officer can follow.

Frequently asked questions

1. When does GST on the transfer of development rights become payable?

Notification No. 06/2019-Central Tax (Rate), issued under section 148, provides that for notified promoters the liability arises on the date of issuance of the completion certificate by the competent authority, or on first occupation of the project, whichever is earlier.

2. Who pays the tax on development rights, the landowner or the developer?

The promoter, under reverse charge, by virtue of entry 5B inserted into the reverse charge notification by Notification No. 05/2019-Central Tax (Rate).

3. Is the transfer of development rights exempt?

Partly. Notification No. 04/2019-Central Tax (Rate) exempts it to the extent attributable to residential apartments booked before completion. The taxable portion therefore depends on how much of the project remains unbooked at the trigger date.

4. What rates apply to residential apartments?

Central tax of 0.75 per cent for affordable residential apartments and 3.75 per cent for other residential apartments and commercial apartments in a residential real estate project, with the matching state tax, giving effective rates of one per cent and five per cent. Both are without input tax credit and payable in cash.

5. What is the eighty per cent procurement condition?

At least eighty per cent of inputs and input services must be procured from registered suppliers, excluding development rights, long term lease of land, floor space index, electricity, high speed diesel, motor spirit and natural gas. The shortfall is taxed at eighteen per cent under reverse charge in the promoter’s hands.

6. How is cement treated?

Cement procured from an unregistered supplier attracts reverse charge at the applicable rate irrespective of whether the eighty per cent threshold is met, so it has to be tracked separately from the main computation.

7. How are the landowner’s constructed apartments valued?

As a supply of construction service for non monetary consideration, valued under section 15 and the valuation rules, in practice by reference to the price charged to independent buyers for similar apartments nearest the date of transfer of the development rights.

8. How is credit apportioned where a project has exempt and taxable elements?

Under Rules 42 and 43 as amended by Notification No. 16/2019-Central Tax with effect from 1 April 2019, computed per project on a carpet area basis, with unbooked apartments at the completion certificate or first occupation date forming part of the exempt element.

9. Is there a credit reversal for unsold inventory?

Yes. The apportionment treats apartments unbooked as at the completion certificate or first occupation date as attributable to exempt supply, so slower sales produce a larger reversal. A final computation is required with reversal and interest or re-credit as the case may be.

10. Could an ongoing project continue under the earlier rates with credit?

Yes, by an election exercised separately for each project by 10 May 2019. New projects commencing on or after 1 April 2019 are compulsorily under the new structure.

11. What is a booked apartment for the purpose of GST on development rights?

An apartment is treated as booked at the completion certificate or first occupation date only if three tests are met by that date: part of the construction service has a time of supply, at least one instalment has reached the promoter’s bank account, and an allotment letter or agreement for sale has been issued. Unbooked apartments are the taxable share.

12. How does the one-third land deduction work in the 1% and 5% GST rates for apartments?

Notification 11/2017-Central Tax (Rate) deems land to be one third of the total amount charged. The headline rates (central tax 0.75 and 3.75 per cent, plus equal state tax) apply on the remaining two thirds, which gives effective rates of one per cent for affordable and five per cent for other residential apartments on the full price.

13. Does GST on development rights apply to joint development agreements signed before 1 April 2019?

The 2019 exemption and deferred time of supply apply only to development rights transferred on or after 1 April 2019. Earlier transfers fall under Notification 4/2018-Central Tax (Rate), under which liability arises when possession or rights in the constructed property pass to the landowner. Notification 23/2019 confirms that Notification 4/2018 does not apply to later supplies.

14. When must the shortfall under the 80 per cent procurement rule be paid?

The promoter computes the shortfall in purchases from registered suppliers at the end of the financial year, and the 18 per cent reverse charge on it must be added to output tax liability by June following the year-end. Cement bought from unregistered suppliers is taxed separately, in the month of receipt, regardless of the 80 per cent test.

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• The 180-Day Payment Condition: Why an ERP Clearing Date Is Not a Payment Date
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• More articles on the SBC blog

Disclaimer

This article is for general information and does not constitute professional advice. It reflects the law as understood at the date of publication and does not take account of later developments, including subsequent amendments to the rate and exemption notifications. The GST treatment of a joint development agreement turns on the terms of the particular agreement, the classification of the project and the facts of its execution. No reader should act on the basis of this article without taking advice on their own circumstances.