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In a major relief to real estate developers, the Bombay High Court’s Goa bench has ruled that Goods and Services Tax (GST) is not applicable on construction services under a Joint Development Agreement (JDA) once the developer becomes the legal owner of the property through conveyance. The judgment, delivered on August 21 by Justices Bharati Dangre and Nivedita P Mehta, is expected to bring clarity to JDA-based projects, especially in land-constrained markets like Mumbai, Bengaluru, and Hyderabad.
The case involved Provident Housing, which had challenged a Rs7 crore tax demand raised on construction services linked to a JDA. The court noted that after executing the agreement, the landowner sold the entire parcel to the developer via registered conveyance, thereby extinguishing all claims under the original JDA. With ownership transferred, the bench held that no GST liability could arise from the earlier agreement.
This ruling resolves a long-standing dispute where the revenue department argued that GST was payable at the time of signing the JDA, while developers maintained that liability should arise only upon transfer of completed property. According to a report published in The Economic Times, the judgment aligns GST liability with actual transfer of property rights, reducing uncertainty for developers.
Legal expert Abhishek A Rastogi, founder of Rastogi Chambers, commented, “The ruling underscores the importance of aligning GST liability with actual transfer of property rights, reducing uncertainty for developers. It reinforces that JDAs cannot be taxed upfront if the developer becomes the property owner.”
Currently, developers are expected to pay 18% GST on such arrangements, often without access to input tax credit, leading to cascading costs. These are typically factored into the final pricing, passing the burden to homebuyers. With most land deals now structured as JDAs and landowners preferring revenue-sharing models, this ruling could significantly influence pricing dynamics and project viability across India.
The decision is also expected to guide similar disputes pending before tribunals and courts, offering clarity in a sector where joint development remains a dominant model for unlocking urban land parcels.
