Landowners get interim court relief from GST on joint development pacts

Time of India

07-05-2025

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The Bombay High Court has granted interim relief to petitioners in a key Goods and Services Tax (GST) dispute involving the treatment of development rights under revenue-sharing joint development agreements.In a case that could have wider implications for the real estate landscape across India, a group of landowners had approached the court to challenge the levy of GST on development rights transferred under such agreements.The court has issued notice to the authorities and granted interim relief, restraining any further action on the impugned tax demands.The dispute centers on whether the transfer of development rights by landowners, typically in exchange for a share in the developed property or revenue, is a 'supply' of services liable to GST, or a 'sale of land' which falls outside the scope of GST under the constitutional framework and the GST law.Arguing on behalf of the landowners, Abhishek A Rastogi, founder of Rastogi Chambers, submitted that the transfer of development rights is an intrinsic part of land ownership and cannot be treated as a distinct service for the purposes of GST.'The issue strikes at the very root of the GST architecture,' Rastogi said. 'Development rights that are part of the land cannot be artificially severed and taxed as services. The legislative intent, including the specific amendments and clarifications introduced from April 1, 2019, need to be interpreted in line with constitutional guarantees and the basic scheme of the GST law.'The division bench, after hearing initial submissions from both sides, observed that the petition raises important questions regarding the taxability, point of taxation, and the person liable to pay tax.The court has issued a Rule and granted interim relief by restraining the tax authorities from enforcing the disputed order until further hearing. The respondents have been directed to file their affidavit-in-reply within four weeks.The case is likely to have wider implications for real estate taxation under the GST regime, particularly in how development rights are classified and taxed.