Supreme Court Stays GST Demand on Real Estate Joint Development Pacts

Supreme Court Stays GST Demand on Real Estate Joint Development Pacts

Title: SC Stays GST Demand on Real Estate Joint Development Pacts (Arham Infra Developers vs. CGST and Central Excise)

Issue: Whether the transfer of land development rights under a Joint Development Agreement (JDA) between a developer and a landowner should be classified as a taxable ‘supply of service’ under GST laws, or whether the transaction’s substance remains a ‘transfer of land,’ which is excluded from the purview of GST.

Facts:

• Joint Development Agreements (JDAs) are widely used structures where a landowner contributes land and, in return, receives a share of constructed units as consideration from the developer.
• The authorities sought to classify the transfer of development rights under the JDA as a taxable supply of service.
• The GST assessment order dated January 27, 2025, raised a tax demand against Arham Infra Developers and its associate Nirmite Buildtech.
• The Bombay High Court had previously refused to stay the GST demand, directing the developer to first approach the statutory appellate authority.

Decision:

The Supreme Court bench of Justices Aravind Kumar and R Mahadevan granted an interim stay on the operation of the GST assessment order against the real estate developer and issued notices to the Central Government.

Key TakeDowns:

• Judicial Intervention on Core Issue: The Supreme Court’s interim stay signals that the matter hinges on the fundamental and contentious legal question of whether GST can be levied on the transfer of development rights, which is viewed by developers as taxing the land component through the back door.
• Potential for Double Taxation: Legal experts argue that such a levy undermines legislative intent and results in double taxation, especially since the constructed units received as consideration are later taxed at the time of sale. * Significance for Industry: The final ruling in this case will have major implications for real estate developers and landowners across the country, as it will determine the taxability of a common industry practice.