In a considerable relief for real estate developers, Goa Bench van de Bombay High Court has ruled that no goods and service tax (GST) owes construction services under a Joint Development Agreement (JDA) as soon as the developer becomes the owner of the real estate through transport.
The ruling regulates a long -term dispute about the point of tax in JDAs, where the income department had sustained that GST was affordable at the time of entering into such agreements, while developers argued that liability could only arise in the transfer of completed property. The judgment is expected to offer much needed clarity for developers who are involved in JDA -based projects, which remain a common model in land -bound markets such as Mumbai, Bengaluru and Hyderabad.
A division bench by Justices Bharati Dangre and NIVEDITA P Mehta delivered the order on August 21. The case before the court was involved in the homes that had challenged a tax question that was raised to building services linked to a JDA and sought a repayment of £ 7 crore it had dropped under protest.
According to legal experts, the decision will help the GST treatment in redevelopment agreements streamline.
“The prevailing underlines the importance of coordinating GST liability with the actual transfer of ownership rights, reducing uncertainty for developers. It strengthens that JDAs cannot be taxed in advance if the developer becomes the owner, a position that could have a broader impact on the real estate sector,” said ABHishek.
According to him, the developer is currently expected to pay 18% GST for such regulations with the landowners, and input tax credit may not be available in some categories, which leads to taxes. The developer factors that this usually costs in the final price to recover from the home buyer, who ultimately bears the burden.
With most land deals that are now structured as joint development, since landowners also prefer sharing income, this will increasingly have an influence on project costs and price dynamics. Experts believe that this could weigh on affordability in markets that already see raised real estate prices.
The income department first demonstrated that GST applied on the date of signing the JDA, stating provisions of the CGST Act and related reports. During the procedure, however, the Department admitted through a statement that liability would only occur with the transfer of possession or rights in the completed property.
The court noted that after the execution of the JDA, the landowner sold the entire package to foreseeable homes via a registered transport, so that all claims were extinguished by mutual permission under the original agreement. With the developer who acquires the ownership of the property, the bank noticed, no GST liability could arise because of the earlier JDA.
The ruling probably affects comparable disputes in treatment before different stands and courts, because joint development agreements remain a preferred structure for unlocking country packages throughout India.
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