High Court Rules No GST on RCM for Development Rights in Landowner-Developer Agreement

• No GST on reverse charge mechanism for development rights transferred under a joint development agreement between landowner and developer.
• Petitioner entered a development agreement on April 7, 2022, to develop a plot into a multi-storied complex for INR 7 crores and two apartments.
• Development rights were based on an agreement with the landowner under the Maharashtra Apartment Ownership Act, 1970.
• Issue was whether the transaction fell under Entry 5B of Notification No. 13/2017 Central Tax Rate.
• High Court ruled Entry 5B applies only when services are supplied by way of TDR or FSI from a planning authority, not a landowner.
• Development rights in this case were not obtained from a planning authority, so Entry 5B does not apply.
• Agreement did not indicate a transfer of TDR or FSI, only compliance with the Maharashtra Apartment Ownership Act.
• Show cause notice and order demanding GST were quashed.
• Judgment is silent on GST leviability in such transactions and collection from the supplier on forward charge mechanism.
• Examination of exemptions under Notification No. 12/2017-CT(R) may be relevant for GST liability on TDR under Development Control Regulations.

Source: taxand.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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