Notification No. 04/2018 – Central Tax (Rate) Explained

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Notification No. 04/2018 - Central Tax (Rate): Seeks to provide special procedure with respect to payment of tax by registered person supplying service by way of construction against transfer of development right and vice versa.

GST: [TO BE PUBLISHED IN THE GAZZETE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

G.S.R (E).- In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the following classes of registered persons, namely :-

registered persons who supply development rights to a developer, builder, construction company or any other registered person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure; and

registered persons who supply construction service of complex, building or civil structure to supplier of development rights against consideration, wholly or partly, in the form of transfer of development rights,

as the registered persons in whose case the liability to pay central tax on supply of the said services, on the consideration received in the form of construction service referred to in clause (a) above and in the form of development rights referred to in clause (b) above, shall arise at the time when the said developer, builder, construction company or any other registered person, as the case may be, transfers possession or the right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).

(Ruchi Bisht)
Under Secretary to the
Government of India

📚 Frequently Asked Questions (FAQs): Notification No. 04/2018 – Central Tax (Rate)

Q1: What is Notification No. 04/2018 – Central Tax (Rate)?

Answer:
It prescribes special GST timing rules for transfer of development rights and construction services 4.

Q2: Under which section was it issued?

Answer:
Section 148 of CGST Act 4.

Q3: What is Transfer of Development Rights (TDR)?

Answer:
It is the right given by landowner to developer to construct on land.

Q4: When does GST liability arise?

Answer:
At the time of transfer of possession or rights through conveyance deed or allotment letter 4.

Q5: Does GST apply at agreement signing stage?

Answer:
No. GST arises only upon transfer of constructed property.

Q6: Does this apply to both landowner and developer?

Answer:
Yes, both parties are covered 4.

Q7: Is this applicable only to registered persons?

Answer:
Yes, applies to specified classes of registered persons 4.

Q8: How should such transactions be reported in GST returns?

Answer:
Report in GSTR-3B when possession transferred.
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Q9: Does this affect ITC availability?

Answer:
ITC rules remain governed by Section 16 & 17.
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Q10: Is GST payable on full property value?

Answer:
GST valuation rules under Section 15 apply based on consideration.

Q11: What if developer delays possession?

Answer:
GST liability arises only upon actual transfer event.

Q12: Does this apply to Joint Development Agreements (JDA)?

Answer:
Yes, typically JDAs are covered under this notification.

Q13: Has law changed after 2019 real estate reforms?

Answer:
Yes, later notifications introduced further clarifications on TDR taxation.

Q14: Should developers maintain special documentation?

Answer:
Yes:
✔ Development agreement
✔ Allotment letter
✔ Conveyance deed

Q15: What compliance mistakes should be avoided?

Answer:
❌ Paying GST at agreement stage
❌ Incorrect timing of tax payment
❌ Wrong reporting in returns

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