Bombay HC’s Landmark Ruling: GST on JDAs Clarified

A recent ruling by the Bombay High Court brings good news for real estate developers and landowners involved in Joint Development Agreements (JDAs). The court has clarified that GST is not applicable at the time of signing a JDA. Instead, the tax liability arises only when there’s an actual transfer of possession or property rights.

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The Case: Provident Housing Ltd. v. Union of India

Provident Housing Ltd., a real estate developer, entered into a JDA with a landowner in 2017. Following the agreement, GST authorities demanded a 12% tax on the construction services, arguing the liability was triggered upon signing the JDA. Provident Housing deposited ₹7 crores under protest and challenged the demand.

The company argued that under Notification No. 4/2018-Central Tax (Rate), GST becomes payable only when the developer transfers possession or rights via a conveyance deed or allotment letter. They also pointed out that all original JDA claims had been extinguished after they bought the entire land from the owner.

The GST department initially insisted that the tax was due at the time the JDA was signed. However, during the court proceedings, they conceded and accepted the developer’s position.

The Court’s Decision

The Hon’ble Bombay High Court sided with the developer, making it clear that:

• GST is a tax on the actual transfer of property rights, not on the initial agreement. The court referenced Notification No. 4/2018, which aligns with this view.
• The original JDA was made void when the landowner sold the property to the developer, meaning there was no taxable supply under the original agreement.
• The tax proceedings were time-barred. The authorities had not issued a proper notice or order within the statutory limitation period.

As a result, the court ordered the government to refund the ₹7 crores with 6% interest.

This ruling is a significant win for the real estate sector, reinforcing the principle that GST is levied on the substantive event of a property transfer, not the initial paperwork.