A recent ruling of the Bombay High Court has come as a relief to many landowners engaging in Joint Development Agreements (JDAs) with the builders. The court ruled that no Goods and Services Tax (GST) is applicable when landowners do not transfer development rights (TDR/FSI) to the builder. This will be beneficial to many ongoing and upcoming redevelopment projects across the state.

In the case before HC, a landowner agreed with a builder to construct a multi-storied residential building on their land. As consideration for the construction work, the landowner paid Rs7 crore and two apartments to the builder, but crucially, did not transfer any development rights to the builder. GST authorities later issued a notice, arguing that GST was payable on a reverse charge basis under Entry 5B of a 2017 central tax notification, which mandates tax on the transfer of development rights or FSI for construction projects.

The entry 5B levies tax on services supplied by any person by........

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