RCM Entries 5B and 5C: TDR, FSI and Long-Term Lease in a Promoter's Hands

RCM Entries 5B explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

These two entries look like a tax on land deals. They are better understood as a backstop: the exemption does most of the work, and the reverse charge collects only on the part of the project the promoter failed to sell before completion.

Entries 5B (transfer of development rights or FSI, including additional FSI, for construction of a project by a promoter) and 5C (long-term lease of land, 30 years or more, against an upfront amount — premium, salami, cost, price, development charges — and/or periodic rent) were inserted by Notification No. 5/2019-CT(Rate) dated 29.03.2019, w.e.f. 01.04.2019. The supplier is any person; the recipient is the promoter. Entries 41A and 41B of Notification No. 12/2017-CT(Rate) exempt the portion attributable to residential apartments booked before the completion certificate or first occupation. The residue is taxed at 18%, but the tax is capped at 1% (affordable) or 5% (other) of the value of the unbooked apartments, and the liability arises on the date of completion or first occupation, whichever is earlier.

The 2019 package these entries belong to

The 33rd and 34th GST Council meetings produced a coordinated set of notifications, all effective 1 April 2019, and the Handbook lists them because none of them makes sense alone:

Entries 5B and 5C are the third row. The fifth and sixth rows are section 9(4) territory, and are dealt with separately. The promoter's 80% shortfall under section 9(4) →

A clean prospective boundary. Before 01.04.2019 these supplies were under forward charge; from 01.04.2019 they are reverse charge in the promoter's hands.

What the exemption does, and what is left over

Entry 41A exempts supply of TDR or FSI of land used for construction of residential apartments in a project that are booked before issuance of the completion certificate or first occupation, whichever is earlier. Entry 41B does the same for the upfront amount payable for a long-term lease, to the extent used for such booked residential apartments.

So the taxable residue is the unbooked residential portion — plus, entirely outside the exemption, the commercial portion. The CBIC FAQ on the real estate sector puts the three cases together:

• Booked residential apartments — exempt.
• Unbooked residential apartments at completion — 18%, but capped at 1% of the apartment value for affordable residential apartments and 5% for others.
• Commercial apartments — 18%, no exemption and no cap.

The formula the notification prescribes:

GST payable on TDR or FSI (including additional FSI) or the upfront amount for long-term lease on land for construction of the residential apartments in the project, but for the exemption × (carpet area of residential apartments remaining unbooked on the date of issuance of completion certificate or first occupation ÷ total carpet area of residential apartments in the project)

When the liability arises — and it is not one date for everything

This is where promoters most often get the timing wrong, because the trigger differs by supply and by the form of consideration. The CBIC FAQ sets it out:

TDR. "The liability to pay GST on development rights shall arise on the date of completion or first occupation of the project, whichever is earlier."

FSI received on or after 01.04.2019:

• Where the consideration is in the form of construction of commercial or residential apartments — liability arises on the date of issuance of the completion certificate.
• Where monetary consideration is paid by the promoter — liability arises on the date of the completion certificate only if the FSI relates to residential apartments; if it relates to commercial apartments, liability arises immediately.

Long-term lease received on or after 01.04.2019:

• For construction of commercial apartments — tax is paid by the promoter immediately.
• For construction of residential apartments — liability on the upfront amount arises on the date of issuance of the completion certificate.

And the periodic component is not deferred at all. The upfront amount enjoys the entry 41B exemption to the extent stated, but "annual/monthly rent or licence fee payable for long term lease is taxable under GST" in the ordinary way.

Developer-to-developer TDR

A separate FAQ answers the question that arises when a developer, rather than a landowner, is the transferor. Yes — GST is payable on transfer of development rights by a developer to another developer, a promoter, or any other person, under reverse charge, at 18% with ITC, under Sl. No. 16, item (iii) of Notification No. 11/2017-CT(Rate) (heading 9972).

The pre-2019 agreement question

The most valuable clarification in the FAQ, and one that still governs old projects: does the new dispensation apply where development rights were transferred by an agreement executed before 01.04.2019 but the consideration flowed on or after that date?

No. "The same are effective prospectively from 01-04-2019. They shall apply only to development rights or FSI transferred on or after 01-04-2019. They shall not apply to development rights transferred by way of an agreement prior to 01-04-2019 even if the consideration for the same, in cash or kind, is paid in part or full on or after 01-04-2019."

The date of transfer governs, not the date of payment.

The definitions that decide the numbers

These are borrowed largely from the Real Estate (Regulation and Development) Act, 2016, and each of them moves money:

• Promoter — clause (zk) of section 2 of RERA.
• FSI — the ratio of a building's total (gross) floor area to the size of the land on which it is built.
• Project — a Real Estate Project (REP) or a Residential Real Estate Project (RREP).
• RREP — an REP in which the carpet area of the commercial apartments is not more than 15% of the total carpet area of all apartments.
• Carpet area, apartment, Real Estate Regulatory Authority — RERA clauses (k), (e) and section 20(1).
• Residential apartment — one intended for residential use as declared to RERA or the competent authority; commercial apartment — any other.
• Ongoing project — four cumulative conditions: a commencement certificate issued on or before 31.03.2019 with certification by a registered architect, chartered engineer or licensed surveyor that construction had started by then (or, where no commencement certificate was required, such certification alone); no completion certificate issued and no first occupation on or before 31.03.2019; and apartments partly or wholly booked on or before 31.03.2019. Construction is treated as started if earthwork for site preparation is complete and excavation for foundation has started by 31.03.2019.
• Affordable residential apartment — carpet area not exceeding 60 sq m in metropolitan cities or 90 sq m elsewhere, and gross amount charged not more than ₹45 lakh. The metropolitan cities are Bengaluru, Chennai, Delhi NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR). Gross amount is the consideration for the construction service, plus the amount charged for transfer of land or undivided share (including by lease or sub-lease), plus any other amount charged by the promoter — preferential location charges, development charges, parking charges, common facility charges and the like.

The gross-amount definition is the trap. A base price below ₹45 lakh that crosses the line once PLC, parking and development charges are added is not an affordable residential apartment, and the 1% cap is unavailable.

The Handbook's worked example

XYZ Developers takes TDR from Mr Verma, a landowner, agreeing to deliver 5 flats valued at ₹75,00,000 each — a TDR transfer value of ₹3,75,00,000. At 18%, that is ₹67,50,000.

• XYZ self-invoices for the TDR received and discharges the liability under reverse charge.
• If all five flats are sold before the occupancy certificate, no GST applies on the TDR to that extent.
• For any flats unsold as at the OC, XYZ must pay proportionately, within the 1% or 5% cap.

The self-invoice is not optional. The landowner is very often unregistered, which puts the transaction squarely in section 31(3)(f).

Key takeaways

• Entries 5B and 5C were inserted w.e.f. 01.04.2019; the supplier is any person, the recipient always the promoter.
• Entries 41A and 41B exempt the portion attributable to residential apartments booked before the completion certificate or first occupation.
• The residue is 18%, capped at 1% (affordable) or 5% (other) of the value of unbooked apartments; commercial apartments bear 18% uncapped.
• Timing differs: TDR and residential FSI/lease crystallise at completion or first occupation; commercial FSI and lease are payable immediately.
• Periodic lease rent is taxable in the ordinary way, unaffected by the entry 41B exemption of the upfront amount.
• The 2019 dispensation is prospective — agreements executed before 01.04.2019 are outside it even if paid later.
• Affordable turns on the gross amount including PLC, parking and development charges, not the base price.

Read next

• Section 9(4): The Promoter's 80% Shortfall
• RCM Entries 5A, 5AA and 5AB: Renting of Immovable Property
• ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route

Disclaimer: Positions stated as on 5 September 2026, based on entries 5B and 5C of Notification No. 13/2017-Central Tax (Rate) as inserted by Notification No. 5/2019-Central Tax (Rate), entries 41A and 41B of Notification No. 12/2017-Central Tax (Rate), Notification Nos. 3/2019 to 8/2019-Central Tax (Rate), the definitions in the Real Estate (Regulation and Development) Act, 2016 and the CBIC FAQs on the real estate sector (F. No. 354/32/2019-TRU dated 7 and 14 May 2019), as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).