GST on Development Rights in Real Estate: Supreme Court Challenge
The Supreme Court of India has taken up a significant case challenging the imposition of Goods & Services Tax (GST) on the transfer of development rights within joint development agreements between realty developers and landowners. This move follows a petition filed by a property developer in Telangana, which has led to notices being issued to the Union government, GST Council, and Central Board of Indirect Taxes and Customs (CBIC) to respond to the Special Leave Petition (SLP).
The applicability of an 18% GST on such transactions is expected to have a profound impact on real estate projects across major property markets nationwide. This decision marks a pivotal shift in the cost dynamics of joint developments and redevelopment projects.
Earlier, in February, the Telangana High Court had dismissed a legal challenge on the same matter, prompting the developer to approach the Supreme Court seeking relief. Abhishek A Rastogi, representing the developer and founder of legal firm Rastogi Chambers, argued that the GST should not apply to the ancillary and incidental rights attached to the sale of land, as the supply of land itself is excluded from GST.
He further contended that the GST on development rights would lead to double taxation, as the second leg of the barter transaction in the form of works contract services is already subject to tax. The developer had initially filed a writ petition in 2020, challenging a GST notification from 2019 that sought to impose tax on the transfer of development rights by landowners to realty developers, akin to a sale of land.
Last year, real estate developers had raised concerns with the Ministry of Finance regarding the impact of GST on rehabilitation apartments provided, free of cost, to existing occupants as part of redevelopment projects. Joint development and redevelopment projects are crucial for most property markets, especially considering rising land prices and limited availability of vacant land in key urban centers.
The issue of 18% GST on the value of development rights could render various projects across key markets like Mumbai, Pune, Bengaluru, Hyderabad, and Kolkata unfeasible for stakeholders, including landowners. The outcome of this case is expected to significantly impact property development strategies and stakeholders within the real estate sector.
UP Government Cancels M3M Noida Land Allotment
Read more: Nimbus The Palm Village: Luxury Living Along Yamuna Expressway
for more updates follow us on instagram
