The GST Council-nominated Group of Ministers on real estate has yet to offer clarity on the treatment and calculation of GST on Joint Development Agreements (JDAs), but a group of landowners has approached the Bombay High Court, questioning the levy of GST on development rights granted under such agreements.
These landowners have moved the court after facing a GST demand of around ₹50 crore—including tax dues, interest, and penalty—for the financial year 2017-18, from the Central GST authority in Nashik, Maharashtra.
According to the authorities, 18% GST should be applied to the total value of the sale. However, the developers have not paid any GST, arguing that tax is not applicable on the sale of land. They further contend that the case involves a revenue-sharing model in which landowners bring in a developer to construct property and sell part of it to recover costs. The landowners then receive a portion of the reconstructed property, along with a share of the revenue from the developer’s sales. The developers argue that no sale is being made to the landowners in this arrangement.
The court, recognising the gravity of the issue, has paused any enforcement action for now and asked the authorities to file a response.
At the centre of the dispute is a key question: when landowners grant developers the right to build on their land in exchange for a share of the constructed property or its proceeds, is that a service liable to GST, or simply a sale of land—which falls outside the scope of GST?
The petitioners are challenging key government notifications issued in 2018, arguing that the authorities are attempting to tax something that is not taxable under the Constitution. They are also contesting a tax order that demands GST on such transfers, calling it flawed both legally and procedurally.
Abhishek A Rastogi of Rastogi Chambers, representing the petitioners, argued that development rights are inseparable from land ownership and should not be taxed as a distinct service. “You can’t split land and its rights just to impose tax,” he said, adding that recent legal amendments must be interpreted in line with constitutional principles.
The court, while withholding a final verdict, acknowledged that the matter raises serious questions about the nature of such transactions, who should be taxed, and at what point. It has given the tax department four weeks to respond and has barred any enforcement action in the meantime.
Industry observers believe the outcome of this case could reshape how redevelopment projects and property deals are structured. A win for the landowners could push the government to re-evaluate how GST applies to such agreements—an area currently riddled with grey zones and legal ambiguity. On the other hand, if the GST authorities prevail, the decision could have wide-ranging implications for the real estate sector across India.
In either scenario, the court’s decision will likely need to be considered by the ongoing Group of Ministers on real estate before it submits any recommendations to the GST Council.
It is also worth noting that, with real estate continuing to be a major driver of urban growth, this case is being closely watched as a test of how tax law aligns with both economic realities and constitutional boundaries.
🧾 Conclusion
The legal battle over GST on Joint Development Agreements highlights a significant grey area in India’s tax regime for the real estate sector. With billions at stake, the outcome of the Bombay High Court case could redefine how development rights are treated under GST law. As the industry awaits clarity, both landowners and developers must tread carefully and stay informed. The verdict—whichever way it goes—will likely influence future tax policy and shape the structure of redevelopment deals across the country. Until then, the uncertainty underscores the urgent need for clear, constitutionally sound guidance from both the judiciary and the GST Council.
GENERAL ASKED QUESTION
Answer:
Currently, there is legal ambiguity. While tax authorities argue that development rights granted by landowners to developers are taxable services under GST, landowners contend that it is merely a sale of land—exempt from GST. The matter is now under judicial review in the Bombay High Court.
Answer:
Landowners have challenged the GST demand of ₹50 crore for FY 2017–18, arguing that the levy on development rights is unconstitutional. They claim that land rights are inseparable from ownership and not a distinct service liable to GST under current laws.
Answer:
The verdict could set a precedent affecting redevelopment projects and property transactions nationwide. A decision favoring landowners might lead to revised GST rules, while a ruling in favor of the authorities could increase compliance burden and reshape future JDAs.
