Landowners seek GST relief on joint development pacts
Several landowners have approached the courts seeking relief from the Goods and Services Tax (GST) authorities’ decision to recover tax from landowners involved in joint development agreements (JDAs) in the real estate sector.
While these matters are pending in the courts of Mumbai, Telangana, and all three courts of the National Capital Region, a specific petition in the Bombay High Court was filed in the first week of April. In this case, a total of 10 landowners have filed the petition.
At the heart of the dispute lies the taxation of development rights transferred by landowners to developers in exchange for a portion of the constructed area or revenue sharing.
The GST authorities have sought to tax landowners in a barter transaction of supply of development rights who receive construction services under the forward charge for rendering services of transfer of development rights. This is instead of reverse charge mechanism, where the recipient of the service, rather than the provider, is liable to pay GST.
he matter is currently under legal scrutiny, and its outcome may affect future structuring of JDAs across the country. ET has seen the copy of GST notices issued to the landowners.
The applicability of 18% GST is expected to impact real estate projects across major property markets nationwide marking a pivotal shift in the cost dynamics of joint developments and redevelopment projects.
