If you've ever wondered how development rights, floor space index and 30-year-plus land leases get taxed in India — this walks through it in plain language, with videos, a quiz and a working calculator. Built for homebuyers, students, and professionals alike.
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📘 This guide and its calculator are for basic understanding only. For a true, detailed picture of your specific project, talk to Pro Tax Tick Solutions.
What are we even talking about?
Four ingredients recur in almost every Indian real-estate GST question: TDR, FSI, long-term land leases, and Joint Development Agreements. Press play on each card below — the first slide defines the concept, the rest walk through a worked example.
TDR — Transfer of Development Rights
FSI — Floor Space Index
Long-Term Lease of Land
JDA — Joint Development Agreement
Residential vs. commercial — and why it matters
Almost every rate and exemption in this area hinges on whether an apartment counts as "residential" or "commercial". It's simpler than it sounds.
Residential apartment
An apartment intended and declared for residential use to RERA or the competent authority — a flat, row house, or villa someone lives in. This is the category that gets the concessional 1%/5% GST rates and the TDR/FSI exemption.
Commercial apartment
Any apartment that isn't residential — shops, offices, showrooms, godowns. When the builder sells one, the builder pays GST under forward charge (not the buyer, and not reverse charge) — typically 5% in an RREP or 12% with ITC otherwise. Separately, any TDR/FSI/lease value behind these units never gets the residential exemption — that part stays taxable at 18% under reverse charge, regardless of timing.
The 15% rule (RREP)
A project stays classified as a "Residential Real Estate Project" (RREP) as long as commercial apartments make up no more than 15% of the total carpet area. Cross that line and it's a plain "REP" instead — this changes the commercial-apartment FCM rate (5% no ITC in an RREP, 12% with ITC in a REP) and ITC eligibility. It does not change whether the residential TDR/FSI exemption applies — that always depends on residential-vs-commercial and booking status, never on the project's RREP/REP label.
Affordable vs. non-affordable housing — and the rates that follow
"Affordable" isn't just a marketing word here — it's a defined category with two conditions that must both be met.
Category
Carpet area limit
Price limit
GST rate on the flat
Affordable residential must meet BOTH conditions
≤ 60 sq.m in metro cities ≤ 90 sq.m in non-metro cities
≤ ₹45 lakh (gross amount charged, including parking/PLC/other charges)
1% (no ITC)
Other / non-affordable residential
Any size that doesn't meet the affordable limits
Any value above ₹45 lakh, or larger carpet area even if cheaper
5% (no ITC)
Commercial apartments (in an RREP)
—
—
5% (no ITC)
Commercial apartments (in a REP that is not an RREP)
—
—
12% (with ITC)
Metro cities for this purpose: Bengaluru, Chennai, Delhi-NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and the whole Mumbai Metropolitan Region. Both the area and the price condition must be satisfied together — missing either one moves the flat into the 5% bucket. These are the rates buyers pay on the flat itself; the TDR/FSI/lease rates the promoter pays under RCM are a separate (though related) calculation, covered next.
📐 These rates already have the land value stripped out. 1%, 5% and 12% aren't applied to the raw agreement value — a standard one-third deduction for the value of land is built into how these rates were fixed (Paragraph 2 of Notification No. 11/2017-Central Tax (Rate), read with the entries at Sl. No. 3 as amended by Notification No. 3/2019-Central Tax (Rate)). So when computing FCM on a flat sale, apply 1%/5%/12% straight to the agreement value — don't deduct land value a second time.
⚠️ Not applicable to ongoing (pre-1 April 2019) projects. A shrinking pool of projects that were already under construction opted, as a one-time choice, to continue under the old 8%/12% rates with full ITC instead of moving to this new scheme. None of the 1%/5%/12% rates, the TDR/FSI exemption, or the RCM cap described on this page apply to those projects — they follow the earlier, different rules under Notification 4/2018-CT(Rate).
The RCM you'd otherwise miss: Section 9(4) and the 80% rule
TDR/FSI/lease isn't the only reverse-charge liability a promoter carries. There's a second, completely separate one, tied to how they buy their construction materials.
The 80% rule
To use the concessional 1%/5% no-ITC residential rates, a promoter must buy at least 80% (by value) of their inputs and input services — for that project, in that financial year — from GST-registered suppliers. Five things are excluded from this 80% calculation entirely: TDR, FSI, long-term lease premium, electricity, and petrol/diesel/natural gas.
Fall short, and it's 18% RCM — cement too, as of late 2025
Whatever portion falls short of that 80% threshold is taxed under RCM at 18% (Section 9(4), CGST Act, operationalised via Notification 7/2019-CT(Rate)). Cement bought from an unregistered supplier was historically stricter — 28% regardless of the 80% mark — but the GST Council's rate rationalisation cut cement's headline GST rate from 28% to 18% with effect from 22 September 2025, and RCM on unregistered cement purchases moved with it, so it's now 18% too, same as the general shortfall rate. Capital goods must still be sourced 100% from registered suppliers — any shortfall there is taxed too.
Different clock, different ledger
The 80%-shortfall RCM is computed annually and added to the promoter's output liability by June following the financial year-end (not immediately, unlike TDR RCM). Cement RCM, by contrast, is due in the same month the cement is received. Both are paid the same way as TDR/FSI RCM — via the electronic cash ledger, never by offsetting ITC.
A genuine escape hatch: pure labour contracts
Not everything in construction is taxable — one narrow but real exemption is worth knowing about.
🔨 If the client supplies all the material and the contractor supplies only labour, that labour service can be GST-exempt — but only under specific conditions. Entry 11 of Notification No. 12/2017-Central Tax (Rate) exempts "services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex." Three things have to genuinely hold: (1) the contractor supplies zero material — even minor materials turn it into a taxable works contract; (2) it's for a single standalone residential unit, never a multi-unit apartment/residential complex project; and (3) it covers original construction — repair, renovation, and fitting-out work isn't covered by this entry. This exemption is essentially irrelevant to a promoter building an apartment complex (which is by definition not a "single residential unit"), but it matters a great deal to an individual homeowner hiring a contractor to build their own standalone house.
Two more things worth knowing about, briefly
RERA runs on a similar clock
The Completion Certificate / Occupation Certificate that drives GST's time-of-supply is often the same milestone that closes out a promoter's RERA compliance obligations for a phase or project. A promoter juggling both regimes is usually tracking the same document for two different purposes — worth keeping in mind when a client asks about GST timing, since a RERA conversation is often lurking right behind it.
E-invoicing — a procedural note
If a promoter's aggregate turnover crosses the notified e-invoicing threshold, invoices for B2B supplies (including, arguably, self-invoices for RCM) need to be reported through the Invoice Registration Portal before they're valid for ITC purposes. This doesn't change any of the tax computations on this page — it's a compliance/procedural layer on top — so it isn't modelled in the calculator, but it's worth flagging to a promoter who's scaling up.
How the tax treatment took shape
The rules didn't arrive all at once — a few milestones got the system to where it stands today.
1
The starting confusion (2017)
GST law said "sale of land" is outside GST entirely. It was unclear whether transferring development rights counted as "sale of land" too, or as a separate taxable service.
2
Point of taxation fixed (early 2018)
Government clarified when GST becomes payable on development rights exchanged for construction services — without yet granting any exemption.
3
The exemption, RCM & timing package (from 1 April 2019)
TDR/FSI/long-lease for residential construction became conditionally exempt, payable by the promoter under reverse charge, with the time of supply pinned to completion certificate or first occupation.
4
A filing-timeline tweak (mid-2021)
The trigger date was reworded so tax is due any time within the tax period in which CC/first-occupation falls — not necessarily on that exact calendar date. The earlier-of-the-two logic stayed unchanged.
5
Still being tested in court (2024 onward)
Developers have challenged whether GST should apply to development rights transferred under a JDA at all, arguing it's really a transfer of land. The Telangana High Court rejected that argument in Prahitha Constructions and upheld the tax; that ruling has been appealed and is currently pending before the Supreme Court, so this isn't fully settled at the highest level yet — though the tax is being actively enforced in the meantime.
Who pays whom — and under which mechanism
There are actually two separate GST payments happening in a real-estate project, on two different mechanisms. The animation below walks through both — then check the diagram and video for the formal version.
RCM vs. FCM — two payments, two triggers
RCM — promoter pays GST on TDR/FSI/lease received, straight from their own pocket
FCM — promoter collects GST from the flat buyer, then remits it forward
📋 This is exactly what a JDA looks like. When a landowner signs a Joint Development Agreement — giving land to a builder in exchange for some flats back, instead of TDR from an authority — GST treats it the same way, just with the labels swapped: the landowner's grant of development rights is Supply 1 (RCM on the developer, same exemption/timing logic as TDR/FSI). But a JDA adds a Supply 2 that pure TDR/FSI deals don't have: the developer must also charge GST — under normal forward charge — on the construction service given back to the landowner (the flats handed over), valued at the open market value of similar flats sold to independent buyers around the same time, less the standard one-third deduction for land value.
⏱
Time of supply for the RCM leg — the date GST liability on TDR/FSI/lease actually falls due — is the date of issuance of the completion certificate for the project, or the date of its first occupation, whichever is earlier. Not "whichever is later" — a common mix-up. The FCM leg on flat sales, by contrast, is triggered on each individual booking/instalment as construction progresses.
Completion Certificate vs. First Occupation — and why "whichever is earlier"
Two different milestones, two different sources — and the law picks whichever happens first, on purpose.
Completion Certificate (CC)
A formal certificate issued by the local municipal or planning authority (e.g. the municipal corporation, development authority, or RERA-appointed engineer) confirming that construction is finished exactly as per the sanctioned plan. It's a regulatory sign-off — the building isn't legally "complete" without it, even if people have already moved in.
First Occupation
The actual, factual date someone first starts living in (or using) the building — regardless of whether the paperwork has caught up. This can happen with a separate "occupation certificate" from the authority, or simply be the date residents physically move in, whichever comes first in practice.
Why "whichever is earlier"
Builders don't always apply for the CC promptly — sometimes people move in well before the formal certificate is issued. If GST only triggered on the CC date, a promoter could delay filing for it indefinitely while the building is already in use, pushing out their tax liability. Pinning it to whichever of the two happens first closes that gap.
🗺️ A quick note on terminology: a number of states — Karnataka and several municipal corporations under Maharashtra's building bye-laws among them — issue an "Occupation Certificate (OC)" rather than (or alongside) a "Completion Certificate." Different states, and sometimes different local bodies within the same state, use these terms slightly differently in their own building regulations. For GST purposes, what actually matters is the substance, not the label: whichever document your local authority issues to certify the building is complete and fit for use, treat its issuance date the same way this page treats "CC" — and compare it against the actual first-occupation date, taking whichever is earlier.
Residential — booked before CC/occupation
RCM exemption applies — provided GST has been paid on that apartment's sale (the FCM leg).
Residential — still unbooked as on CC/occupation
RCM exemption doesn't apply to this slice. Promoter pays GST under RCM at a concessional 1% (affordable) or 5% (other), on a value proportionate to the carpet area still unbooked.
Commercial apartments
No RCM exemption at all, ever. The TDR/FSI/lease value behind them is taxable at 18% under RCM regardless of booking status or timing — on top of the separate sale-side GST (FCM, paid by the builder, typically 5% in an RREP or 12% with ITC otherwise).
JDA's extra leg — construction service to the landowner
Only in a JDA: the developer's own construction service handed back to the landowner is a separate FCM supply, valued at the open market value of similar flats sold to independent buyers, less the standard 1/3rd land deduction.
The exemption logic, spelled out
Here's exactly how that "booked vs unbooked" split turns into a rupee figure the promoter owes.
✓ The exemption from RCM works proportionately: Exempt value = Total TDR/FSI/lease value attributable to residential apartments × (Carpet area booked before CC/first-occupation, whichever is earlier ÷ Total carpet area of residential apartments). Whatever is left over (the un-booked proportion) is what the promoter actually pays GST on. The calculator tab is built directly on this formula.
Why "18%" RCM actually means 1% or 5%
This trips a lot of people up, so it's worth spelling out precisely.
🧮 The statutory rate on TDR/FSI/lease under RCM is 18% — full stop. But the same proviso that creates the exemption also writes in a ceiling: the tax actually payable "shall not exceed" 1% of the value for affordable residential apartments, or 5% for other residential apartments, remaining unbooked at CC/first occupation. Since 1% and 5% are always less than 18%, that ceiling always wins — so in practice, the promoter never actually pays 18% on the residential portion; they pay exactly 1% or 5% of the unbooked value. The "18%" only shows up as the real, uncapped rate for the commercial portion, which has no such ceiling. This isn't a separate outward-supply concept — it's baked directly into the RCM computation itself (second proviso to Entries 41A/41B of Notification 12/2017-CT(Rate), as inserted by Notification 4/2019-CT(Rate)).
📘 This calculator is for basic understanding only. For a true, detailed picture of your specific project, talk to Pro Tax Tick Solutions.
The full RCM + FCM calculator
Walk through it top to bottom — each step feeds the next. Works for TDR, FSI, a long-term lease, or a JDA; pick your scenario below.
TDR
FSI
Long-term Lease
JDA
1
Value of the TDR
Consideration can be monetary (cash paid) or non-monetary (a share of built-up area given instead).
Statutory method: price charged for similar apartments to independent buyers nearest the transfer date, minus land value. Use guideline value only when no comparable sale exists.
Total value of TDR—
2
Project mix & classification
This determines whether the project is an RREP or a REP — which affects the commercial apartment's FCM rate and ITC eligibility (not the residential exemption, which never depends on this).
3
Residential apartments — booking status, by category
Enter affordable and non-affordable residential units separately — they carry different RCM caps and FCM rates.
These four figures should add up to the total residential carpet area entered in Step 2. Adjust so they match.
RCM liability — receipt
STEP 1–3 COMBINED · GST PAYABLE BY THE PROMOTER UNDER REVERSE CHARGE
Value attributable to residential—
Value attributable to commercial—
Split by carpet area: residential ÷ total project area, and commercial ÷ total project area
— Affordable: taxable (unbooked) value—
— Affordable: RCM @ 1% (capped)—
— Non-affordable: taxable (unbooked) value—
— Non-affordable: RCM @ 5% (capped)—
— Commercial: RCM @ 18% (no exemption, ever)—
Total RCM payable—
4
Time of supply & due date for the RCM payment
Due date for RCM payment—
⚠️ If not paid by this date, interest applies at 18% p.a. on the delayed amount. This liability must be discharged using the electronic cash ledger only — it cannot be set off against any input tax credit balance. (Due date assumes monthly filing; QRMP-scheme taxpayers may have a 22nd/24th due date instead, depending on state.)
5
FCM liability — sale of units
Add each block of units sold with its actual sale value, instead of using one average figure. Time of supply for this leg is the date of invoice or payment, whichever is earlier — independent of the CC/FO date above.
Description
Category
Sale value (₹)
GST
Total FCM output tax
₹0
6
Input Tax Credit — commercial units in a REP only
ITC is available only for commercial apartments in a project classified as a REP (not RREP) — never for residential units or for commercial units inside an RREP.
Description (inputs / input services / capital goods)
Taxable value (₹)
GST rate (%)
ITC (₹)
ITC on above, proportionate to commercial-REP share—
Total ITC entered × (commercial-REP carpet area ÷ total project carpet area) — Rule 42/43 style apportionment
Plus: RCM already paid on the commercial-REP portion (taken in full)—
Total ITC available—
7
Section 9(4) — RCM on the 80% procurement shortfall
A separate RCM liability from the TDR/FSI one above — this one is about how the promoter buys their construction materials, not about development rights. Covers this project's financial year.
Section 9(4) — assessment
ILLUSTRATIVE · ANNUAL COMPUTATION
Registered-procurement shortfall (below the 80% mark)—
Value of that shortfall—
RCM on shortfall @ 18%—
RCM on unregistered cement @ 18% (reduced from 28%, effective 22 Sep 2025)—
RCM on unregistered capital goods @ 18% (100% registered required)—
Total Section 9(4) RCM payable—
Due by June following the financial year-end (cement RCM is due monthly, in the month received) — paid via cash ledger, same as the TDR/FSI RCM above. This is a genuinely separate liability; it doesn't reduce or replace the RCM computed in Steps 1–4.
Net position
RCM payable — TDR/FSI/lease (cash ledger, by due date above)—
Net FCM payable (cash + credit ledger, per return)—
Total GST cost of the project (illustrative)—
All three RCM figures (TDR/FSI, Section 9(4) shortfall, cement) must always be paid in cash, regardless of any ITC balance — ITC only ever nets against FCM output tax. They're summed here purely to show the project's total illustrative GST cost, not because they're interchangeable in an actual return.
JDA only: Supply 2 — construction service to the landowner
A JDA creates a second, separate FCM leg: the developer's construction service handed back to the landowner. This is on top of everything above, not instead of it.
This 1/3rd deduction is separate from — and doesn't overlap with — the deduction already baked into the 1%/5%/12% headline rates on ordinary flat sales; Notification 3/2019's Para 2A requires it specifically for valuing construction service given to a landowner. One caveat worth knowing: sources disagree on whether the 1%/5%/12% rate should then be applied directly to this reduced value (the more commonly seen shorthand, and what this calculator does), or whether the un-abated nominal rate (1.5%/7.5%/18%) should apply instead to preserve exact parity with an ordinary buyer's tax. There's no single published CBIC example settling this — treat this figure as illustrative and confirm the approach with a professional for an actual filing.
JDA Supply 2 — assessment summary
ILLUSTRATIVE · DEVELOPER'S FORWARD-CHARGE LIABILITY TO THE LANDOWNER
Gross value of construction service—
Market rate × Landowner's carpet area
Land-value deduction applied—
Taxable value of construction service—
FCM rate applied—
GST payable by developer (FCM)—
This is charged by the developer to the landowner via a normal tax invoice — it isn't reverse charge, and it isn't affected by whether the landowner's flats are later resold.
JDA only: the landowner's side
The landowner can claim ITC of the GST the developer charged them above (Supply 2) — but only up to the output tax the landowner themselves pays if they resell their share before CC/FO.
Landowner's position
ILLUSTRATIVE
Landowner's own output tax on resale—
GST charged by developer (Supply 2, above)—
ITC the landowner can actually use—
Capped at the lower of the two figures above. If the landowner doesn't resell before CC/FO (keeps the flat, or sells after CC), no ITC can be utilised at all.
JDA only: TDS implications (Income Tax Act — separate from GST)
Two different TDS provisions sit alongside the GST computation above. Neither affects the GST figures, and GST doesn't affect either of these: TDS is always computed on the value excluding GST, and GST is always computed on the full value regardless of TDS.
A. Developer paying cash to the landowner
Section 194-IC, Income-tax Act 1961 (from 1 April 2026: Section 393(1), Table Sl. No. 3(ii), Income-tax Act 2025). Applies only to the cash component — the built-up-area portion isn't subject to this TDS.
10% if PAN is furnished; 20% if not (Section 206AA). No minimum threshold — applies to the full amount from ₹1 onward.
194-IC — assessment
ILLUSTRATIVE
TDS rate applied—
TDS to be deducted & remitted to government—
Net amount remitted to landowner—
B. Buyer paying for a flat (developer's or landowner's share)
Section 194-IA, Income-tax Act 1961 — same substance carries into the 2025 Act's Section 393 table. The buyer deducts this, not the seller. No deduction at all if both the consideration and the stamp duty value are below ₹50 lakh.
194-IA — assessment
ILLUSTRATIVE
TDS applicable?—
GST on sale value (unaffected by TDS)—
Total buyer pays (sale value + GST)—
TDS @1% deducted by buyer (on sale value, excl. GST)—
Net amount the seller actually receives—
Net received = Sale value + GST − TDS. The seller still reports the full sale value + GST for GST purposes; the TDS is simply withheld and remitted by the buyer against the seller's income-tax liability, claimable by the seller when filing their return.
Test yourself
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QUESTION 1 OF 15
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