Bombay HC rules no GST on JDA projects post-conveyance, offering relief to real estate developers
The ruling ends a joint development agreement tax dispute where the revenue department said GST applied on signing, while the developers argued it
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 property owner through conveyance.
This ruling offers significant relief to real estate developers and is expected to bring clarity for JDA-based projects in land-constrained markets like Mumbai, Bengaluru, and Hyderabad. It is also likely to help streamline GST treatment in redevelopment projects, a report published in the Economic Times said.
The ruling settles a long-standing dispute on the taxation of JDAs. The revenue department had maintained that GST was payable at the time of entering into such agreements, while developers argued that liability could arise only upon transfer of completed property, the report said.
It said that the judgment is expected to provide much-needed clarity for developers engaged in JDA-based projects, which remain a common model in land-constrained markets such as Mumbai, Bengaluru, and Hyderabad.
The ruling was passed by a division bench of Justices Bharati Dangre and Nivedita P Mehta, who delivered the order on August 21. The ruling was passed during the case involving Provident Housing, which had challenged a tax demand raised on construction services linked to a JDA and sought a refund of ₹7 crore it had deposited, the report said.
Ruling expected to streamline GST treatment
The ruling is expected to streamline GST treatment in the redevelopment deals, the report said, quoting legal experts.
"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, a position that could have a wider impact across the real estate sector," the report said, quoting Abhishek A Rastogi, founder of Rastogi Chambers.
According to Rastogi, the developer is currently expected to pay 18% GST for such arrangements with the landowners, and input tax credit may not be available in some categories, leading to tax cascading. The developer usually factors this cost into the end price to recover from the homebuyer, who eventually bears the burden.
Most land deals are now structured as joint development, and landowners also prefer revenue sharing. This will increasingly impact project costs and pricing dynamics.
According to the report, the court noted that after execution of the JDA, the landowner sold the entire parcel to Provident Housing through a registered conveyance, thereby extinguishing all claims under the original agreement by mutual consent. With the developer acquiring ownership of the property, the bench observed, no GST liability could arise on account of the earlier JDA.
The ruling is likely to influence similar disputes pending before various tribunals and courts, as joint development agreements remain a preferred structure for unlocking land parcels across India, the report added.
