Bombay High Court Exempts Real Estate Developers from GST in Joint Development Agreements
The Bombay High Court’s Goa bench has ruled that no goods and services tax (GST) is payable on construction services under a joint development agreement (JDA) once the developer becomes the owner of the property through conveyance. This ruling provides much-needed clarity for developers in land-constrained markets.
Real EstateGstJoint Development AgreementBombay High CourtProperty DevelopmentReal Estate MumbaiSep 12, 2025
The judgement 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. A division bench of Justices Bharati Dangre and Nivedita P Mehta delivered the order on August 21. The case before the court involved Provident Housing that had challenged a tax demand raised on construction services linked to a JDA and sought a refund of ₹7 crore it had deposited under protest.
According to legal experts, the decision will help streamline GST treatment in redevelopment deals. '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 eventually becomes the property owner, a position that could have wider impact across the real estate sector,' said Abhishek A Rastogi, founder of Rastogi Chambers.
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. With most land deals now structured as joint development, as landowners also prefer revenue sharing, this will increasingly impact project costs and pricing dynamics. Experts believe this could weigh on affordability in markets that are already seeing elevated property prices.
The revenue department had initially insisted that GST was applicable on the date of signing the JDA, citing provisions of the CGST Act and related notifications. However, during the proceedings, the department admitted through an affidavit that liability would arise only upon transfer of possession or rights in the completed property. 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. Developers often enter such partnerships with landowners to mitigate upfront capital requirements and share project risk. This decision will provide clarity and potentially reduce the financial burden on developers, ultimately benefiting the real estate market.
Frequently Asked Questions
What is a Joint Development Agreement (JDA)?
A Joint Development Agreement (JDA) is a legal contract between a developer and a landowner where they agree to develop a piece of land together. The developer constructs the project, and the landowner receives a share of the developed property or financial compensation.
What was the main issue in the dispute between the revenue department and real estate developers?
The main issue was whether GST should be payable at the time of entering into a JDA or only upon the transfer of the completed property. The revenue department argued for upfront taxation, while developers contended that liability should arise only after the property transfer.
What was the Bombay High Court’s ruling on GST in JDAs?
The Bombay High Court ruled that no GST is payable on construction services under a JDA until the developer becomes the owner of the property through conveyance. This aligns GST liability with the actual transfer of property rights.
How will this ruling impact the real estate sector?
This ruling will provide clarity and reduce uncertainty for developers, potentially lowering project costs and improving affordability in markets with high property prices. It will also streamline GST treatment in redevelopment deals and influence similar disputes.
What are the benefits of JDAs for developers and landowners?
JDAs help developers mitigate upfront capital requirements and share project risks. For landowners, JDAs offer revenue sharing and the potential for a share of the developed property, making it a mutually beneficial arrangement.
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