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Delayed possession: Maharashtra Tribunal rules that homebuyers cannot seek refund of GST, stamp duty, TDS from developer
The Maharashtra Tribunal held that GST, stamp duty and TDS are paid to the government, not retained by developers, so homebuyers must approach the authorities
The Maharashtra Real Estate Appellate Tribunal (MREAT), while directing a developer to refund more than ₹2 crore to a homebuyer for delayed possession, held that buyers cannot seek a refund of GST, stamp duty, registration fees, TDS, MVAT, or similar government levies from developers.
The tribunal noted that these charges are not retained by developers but are remitted directly to government departments. Therefore, the homebuyer must apply to the respective authorities to obtain any refund of such statutory taxes.
The case
A homebuyer booked a roughly 1,000 sq ft apartment in Mumbai’s western suburbs for over ₹2 crore in January 2017. As per the agreement, the developer was required to hand over possession by December 2019, with a grace period extending up to December 2020.
The project, however, was delayed and obtained only a partial occupation certificate (OC) in July 2022. Alleging that the developer had made unilateral changes, the homebuyer chose to withdraw from the project. He sought a refund of all amounts paid toward the unit, including service tax, GST, TDS, stamp duty, and other applicable charges, along with interest as per the law.
Case referred to MahaRERA
The case of the homebuyer was referred to the Maharashtra Real Estate Regulatory Authority (MahaRERA), which directed the developer to refund the consideration amount, along with interest.
However, the homebuyer had requested that the developer refund the payment, including taxes such as GST, TDS, and stamp duty, among others. Following the MahaRERA order, the homebuyer approached the tribunal, also known as MREAT.
MREAT rejects the homebuyer’s demand for a refund of taxes
In its judgment, the tribunal noted that the homebuyer had argued that GST, MVAT, TDS, stamp duty, and registration charges should be refunded with interest, since the developer had failed to hand over possession within the agreed timeline specified in the agreement for sale.
The developer, on the other hand, contended that these statutory dues had been paid by the homebuyer and transmitted to the government, meaning the developer had not retained or benefited from them and therefore had no liability to refund such amounts.
After hearing both parties, MREAT held that the taxes and duties in question were paid to government authorities and did not form part of the consideration for the flat. Since the promoter had not benefited from these payments, they could not be ordered to refund them. The tribunal further noted that Section 18(1) of the RERA Act obligates the promoter to refund only the amount actually received toward the apartment, plot, or building when an allottee withdraws, not including statutory levies paid to the government.
The MREAT ruled, "We are therefore of the view that taxes paid to the Government could not be termed as the amount received by the developer in respect of the subject flat."
The developer functions as a collection agent and remits taxes to the government
According to the MREAT ruling, taxes such as GST and MVAT are borne by the consumer or allottee and merely collected by the promoter (developer) as a service provider. The promoter functions as a collection agent and remits these amounts to the government; therefore, it cannot be asked to refund them.
Regarding tax deducted at source (TDS), the tribunal noted that the homebuyer deposits this amount directly with the government. Although the developer receives credit for the advance tax, it does not retain the amount. Since the TDS is paid to the Income Tax Department, the developer cannot be held liable to refund it. The appropriate remedy for the homebuyer is to seek a refund from the tax authorities, the order said.
Further, the tribunal clarified that stamp duty and registration charges are paid by the homebuyer in their own name. As such, only the homebuyer is entitled to seek a refund of these charges from the relevant authority after executing the deed of cancellation, the MREAT said in its order.
This is what legal experts have to say
According to legal experts, this ruling provides much-needed clarity on the issue of tax refunds in real estate transactions.
"This ruling brings significant clarity to the issue of refund of GST, MVAT, TDS, stamp duty and registration charges. It is pertinent to note that the Bombay High Court, in a Second Appeal filed by Krishna Developers Pvt. Ltd. vs Kunal Kumbhat, has admitted the appeal on substantial questions of law, including whether a flat purchaser is entitled to claim refund of statutory payments such as stamp duty, registration charges, taxes etc, and whether a developer can be directed to pay interest under Section 18 of the RERA on such statutory amounts," said Trupti Daphtary, a Mumbai-based solicitor.
"This issue remains pending before the Bombay High Court, and the Court’s final determination is expected to conclusively settle the legal position on this subject,' Daphtary said.
