09 February 2024 Taxation and Duty >> Property & Real Estate   |   GST >> Tax Laws   |   Property Tax >> Tax Laws  

A recent court judgment has settled the debate on whether Joint Development Agreements (JDAs) attract Goods and Services Tax (GST) in India. The court ruled in favor of the government, clarifying that the transfer of development rights under a JDA is subject to GST.

The Case:

A landowner challenged the government's position of imposing GST on JDA transactions. The landowner argued that the JDA constituted a sale of land, exempt from GST under the law. The court meticulously examined the JDA clauses and concluded that the agreement involves two distinct transactions:

1. Agreement between Landowner and Developer: This initial agreement itself doesn't involve a transfer of ownership. The landowner retains ownership throughout the project.

2. Construction Services and Sale of Developed Area: The developer constructs on the land and then performs two further actions:

o Provides construction services to the landowner (taxable under GST).

o Sells the landowner their share of the developed area (also taxable under GST).

Key Considerations:

• Supreme Court precedents were cited to support the view that ownership rights in the land only transfer after project completion.

The Notification Upheld:

The government had issued a notification clarifying the timing of GST payment for development right transfers in JDAs. The court clarified that this notification doesn't impose a new tax, but simply streamlines the process for both parties.

Impact of the Decision:

This judgment provides much-needed clarity for both landowners and developers entering into JDAs. Court further held that the grounds and contentions raised by the petitioner in respect of the reliefs sought for is not sustainable and the writ petition sans merit and therefore deserves to be and is accordingly, dismissed with no costs. It confirms that the transfer of development rights under a JDA is subject to GST, with the tax being levied at different stages depending on the specific services rendered.

  CENTRAL GOODS AND SERVICES TAX ACT, 2017    Transfer of Property Act, 1882