Bombay HC: No GST on Homeowner-Led Redevelopment via Builders
In a relief for homeowners or landowners, the Bombay High Court on April 8, 2025, ruled that no Goods and Services Tax (GST) can be levied on re-development of a land by a homeowner/ landowner through a builder in specific cases where the development rights are not sold. In legal terms, the high court interpreted the law and made a distinction between the standalone transfer of Transfer of Development Rights (TDR) or Floor Space Index (FSI) and the transfer of development rights under a joint development agreement (JDA) between a builder and homeowner.
To give you a brief how JDAs work, think of a homebuyer/landowner who has a plot of land. To monetise this land, the homeowner/landowner sells the land’s development rights to a builder in exchange for money or apartments and then also pays the builder for construction work of a multi-storied apartment on the said plot of land.
So essentially you are making two transactions:
- Selling redevelopment rights to builder
- Buying construction services from builder
So as per the prevailing law, when you sell your development rights in a plot to a builder, the GST on this transaction is paid by the builder on Reverse Charge Mechanism (RCM) basis, which of course is priced in the transaction. And the money which you pay to the builder for construction work is also chargeable to GST, but this GST is paid by you (homeowner/landowner). This is how there are two incidences of GST payment -- one for selling development rights (on RCM basis) and another for construction services (forward charge GST). Both the GSTs are ultimately paid by the homeowner/landowner, the only difference is the mode of collection (RCM, normal).
However, in this case being talked about in this article, the homeowner paid the builder Rs 7 crore and gave 2 apartments in exchange for construction work of a multi-storied apartment on the plot. The development rights were not sold and hence no GST was paid. This is where the tax officials had a problem and demanded that GST must be paid by the builder on an RCM basis after taking it from the homeowner/landowner. Hence the reason why the builder got a GST tax demand notice after which he filed a case in court.
