Buying From the Landowner's Share in a Bengaluru Joint Development: How GST Works

The sales executive offers two prices for what looks like the same flat in a Bengaluru joint development. One unit is from the builder's share; the other is from the landowner's share, sold directly by the family that gave the land. The landowner's flat is a little cheaper, and the buyer wonders whether GST works differently when the seller is a landowner rather than a developer. The Finance Ministry answered that question in 2019, and a Kerala ruling in October 2025 explained how the tax flows between the two sides of such a deal.

The first source is Part II of the Tax Research Unit's FAQs on real estate, dated 14 May 2019. The second is Advance Ruling No. KER/30/2025 dated 8 October 2025 of the Kerala Authority for Advance Ruling, given to SI Property Kerala Private Limited and listed on the GST Council's advance ruling register. This guide reads both for a Bengaluru buyer choosing between a builder's flat and a landowner's flat. It is buyer guidance, not tax advice.

The short answer. The 2019 FAQ says the effective rates of 1 per cent and 5 per cent without input tax credit apply to apartments booked by a landowner-promoter, in an ongoing project or a new project starting on or after 1 April 2019, where the landowner sells under-construction flats before completion. The landowner-promoter can take input tax credit of the tax the developer-promoter charges on constructing those flats, but not on other goods or services. The Kerala ruling held that GST applies to the landowner's share of constructed flats because the landowner receives them as consideration for transferring development rights. The trade-off: buying from the landowner's share can mean a different seller and paperwork, but for an under-construction flat the GST rate you pay is the same 1 or 5 per cent as from the builder's share.

Does GST apply when I buy from the landowner's share?

Yes, at the same rates, for an under-construction flat. Question 2 of Part II of the FAQ asks whether, in an area sharing arrangement between a landowner-promoter and a developer-promoter in a new project undertaken on or after 1 April 2019, the new rate of 1 per cent or 5 per cent applies where the landowner-promoter sells under-construction premises before completion of the project. The answer says the new effective rates of 1 per cent and 5 per cent without input tax credit are applicable to the apartments booked by the landowner-promoter in an ongoing project as well as a new project which commences on or after 1 April 2019.

For a buyer, that means the GST line on a landowner's under-construction flat should look like the one on a builder's flat of the same category. Our guide to the 1 and 5 per cent rates and the affordable housing test explains which rate applies to which flat.

A quick illustration. If a non-affordable under-construction flat costs Rs 80 lakh, the FAQ's effective 5 per cent rate on total consideration works out to Rs 4 lakh, whether the seller on your agreement is the builder or the landowner-promoter. What changes is who issues the invoice and collects the tax, not the effective rate.

How does the tax flow between landowner and builder?

Through credit. The same FAQ answer says the landowner-promoter shall be entitled to input tax credit in respect of tax charged to him by the developer-promoter on construction of such apartments. It adds that the landowner-promoter shall not be entitled to avail input tax credit on any other services or goods used by him, such as brokerage on sales.

The Kerala ruling describes the other side of the same arrangement. It held that GST is applicable to the landowner's share of constructed residential flats, because the landowner receives these flats as consideration for transfer of development rights to the promoter. Such consideration constitutes a taxable supply, the construction service provided by the promoter to the landowner is liable to GST, and the promoter is required to discharge that tax.

What rate and value did the Kerala ruling apply?

Five per cent on the construction service, valued by reference to similar flats. The ruling says that since the applicant was constructing residential apartments, other than affordable units, under a Residential Real Estate Project, the applicable rate is 5 per cent, made up of 2.5 per cent CGST and 2.5 per cent SGST, without input tax credit, under Notification No. 03/2019 dated 29 March 2019. It says the value of the construction service shall be deemed to be the value of similar apartments sold to independent buyers near the date of transfer of development rights, under paragraph 2A of Notification No. 03/2019.

What about the development rights themselves?

The Kerala ruling addressed that too. It said that under Section 9 of the CGST Act read with the relevant notifications, GST at 18 per cent applies to the transfer of development rights by a landowner to a promoter, payable by the promoter under reverse charge. However, it said development rights used for construction of residential apartments are exempt, except for the portion relating to units that remain un-booked on the date of the completion certificate or first occupation. It added that for development rights received on or after 1 April 2019, the promoter is liable to pay GST under reverse charge on the portion attributable to residential apartments that remain un-booked on the date of the completion certificate or first occupation, whichever is earlier.

Those are the builder's and landowner's taxes, not yours. They matter to a buyer mainly because they explain why the two sellers in a joint development may describe their GST positions differently, even when your rate is the same.

What counts in the Rs 45 lakh affordable test?

Almost every charge on the cost sheet. Question 4 of Part II asks whether amenity charges, society formation charges, advance maintenance and legal charges are included when testing the Rs 45 lakh limit for an affordable residential apartment. The answer says all charges or amounts charged by the promoter from the buyer of the apartment form part of the gross amount, quoting the notification's reference to any other amount charged by the promoter, including preferential location charges, development charges, parking charges and common facility charges. It adds that the value does not include stamp duty payable to the statutory authority, or maintenance charges and deposits for maintenance of the apartment or common infrastructure.

This applies to a landowner-promoter's flat as much as a builder's. If the base price is close to Rs 45 lakh, add the parking, location and facility charges before deciding which rate applies.

Must both sides choose the same tax option?

For older ongoing projects, yes. Question 1 of Part II asks whether, in an area sharing arrangement in an ongoing project, the developer-promoter and landowner-promoter can choose between the new rates and the old rates independently. The FAQ answers that legal and operational harmony necessitates that both the landowner-promoter and the developer-promoter exercise identical option for a project. If you are buying in a project that started before April 2019, ask both sellers which rate they charge, and expect them to match.

What should I check before buying from the landowner's share?

Who the promoter is, and how you will be billed. Ask whether the landowner is registered as a promoter or co-promoter for the project, whether the flat is under construction or already complete, and what GST rate appears on the landowner's invoices. Our guide to who counts as a promoter under RERA explains why a landowner who sells flats can carry the same obligations as the builder. Our piece on landowners as co-promoters shows how one state regulator has put it.

A seven-point checklist for buying from a landowner's share

1. Ask whether the flat is from the builder's share or the landowner's share.
2. Confirm the landowner is shown as a promoter or co-promoter for the project.
3. Check whether the flat is under construction or complete when you book.
4. Ask which GST rate the landowner will charge, 1 or 5 per cent.
5. Check whether your flat meets the affordable housing test.
6. For a project started before April 2019, confirm both sellers use the same rate option.
7. Get GST invoices from the seller you actually pay, for every instalment.

Frequently asked questions

Is GST charged on a flat bought from the landowner's share?

Yes, for an under-construction flat. The Finance Ministry's 14 May 2019 FAQ says the effective rates of 1 per cent and 5 per cent without input tax credit apply to apartments booked by a landowner-promoter in an ongoing project or a new project starting on or after 1 April 2019.

Can the landowner claim credit for GST the builder charged?

The 2019 FAQ says the landowner-promoter is entitled to input tax credit for tax charged by the developer-promoter on construction of the apartments the landowner sells. It adds that the landowner-promoter cannot avail input tax credit on any other goods or services, such as brokerage on sales.

Why is GST payable on flats given to the landowner?

The Kerala ruling of 8 October 2025 held that the landowner receives the flats as consideration for transferring development rights, which makes the promoter's construction service to the landowner a taxable supply. It applied 5 per cent for non-affordable units, valued by reference to similar flats sold to independent buyers.

Can the builder and landowner charge different GST rates?

For ongoing projects, the 2019 FAQ says legal and operational harmony requires that both the landowner-promoter and the developer-promoter exercise an identical option for a project. For new projects starting on or after 1 April 2019, the 1 and 5 per cent rates apply.

Last updated 2026-11-05. PropNewz Team.