Supreme Court Grants Stay on GST Demand for Real Estate Joint Development Agreements
The Supreme Court has temporarily halted a Goods and Services Tax (GST) demand on a real estate project under a joint development agreement (JDA), a decision that could have significant implications for the real estate industry.
GstReal EstateJoint Development AgreementSupreme CourtLand Development RightsReal EstateOct 30, 2025
JDAs between property developers and landowners are a widely used structure as they allow developers to unlock land without upfront purchase. The authorities have sought to classify the transfer of land development rights under JDAs as a taxable 'supply of service' under GST laws. Developers, however, challenge this classification, arguing that the deal ultimately involves the 'transfer of land', which is outside the purview of GST.
A top court bench of Justices Aravind Kumar and R Mahadevan, through an order earlier this month, has stayed the operation of an assessment order dated January 27, 2025, passed by the CGST and Central Excise, Nashik-I division against Arham Infra Developers and its associate Nirmite Buildtech.
The bench issued notices to the central government and other respondents named in the developer's special leave petition, and posted the matter for the next hearing within four weeks of the order that was delivered on October 13.
The Bombay High Court had earlier refused to stay the GST demand, holding that the developer should first approach the statutory appellate authority under the CGST Act instead of directly invoking the court's writ jurisdiction. The Supreme Court's interim stay has renewed the debate over the taxability of JDAs.
According to legal experts, the matter hinges on the fundamental question of how transfers of land are treated under GST. 'At its core, a JDA is nothing but a structured mechanism for the transfer of land interests,' said Abhishek A Rastogi, founder of Rastogi Chambers. 'Statutorily, sale of land is excluded from the purview of GST. When a landowner contributes land to a development project, the substance of the transaction remains the transfer of land or rights in land.'
Rastogi argues that merely because the arrangement involves deferred consideration in the form of constructed units, the intrinsic nature of the transaction cannot be converted into a 'supply of service.' The attempt to impose GST on development rights effectively taxes the land component through the back door, which undermines the very legislative intent and results in double taxation, especially when the same units are later taxed at the time of sale.
The case assumes significance for the broader real estate industry as joint development structures dominate urban redevelopment and greenfield projects across the country. The Supreme Court's intervention signals the continuing judicial churn on how GST applies to JDAs. In August, the Goa bench of the Bombay High Court held that no GST is payable once ownership of land is transferred to the developer, providing clarity on when tax liability arises in such arrangements.
Frequently Asked Questions
What is a Joint Development Agreement (JDA) in real estate?
A Joint Development Agreement (JDA) is a legal contract between a property developer and a landowner, where the developer agrees to develop the land in exchange for a share of the completed project. This structure allows developers to unlock land without an upfront purchase.
Why is GST being demanded on JDAs?
The authorities are classifying the transfer of land development rights under JDAs as a taxable 'supply of service' under GST laws. Developers argue that this classification is incorrect, as the deal ultimately involves the transfer of land, which is outside the purview of GST.
What was the Supreme Court's decision regarding the GST demand on JDAs?
The Supreme Court has granted a temporary stay on the GST demand related to a real estate project under a joint development agreement. This decision has major implications for real estate developers and landowners across the country.
What are the potential implications of this decision for the real estate industry?
The decision could reshape the landscape for developers and landowners, as joint development structures dominate urban redevelopment and greenfield projects. It may provide clarity on the taxability of JDAs and prevent double taxation.
What is the legal argument against taxing JDAs under GST?
Legal experts argue that the transfer of land or land development rights under JDAs is fundamentally a transfer of land, which is excluded from the purview of GST. Imposing GST on development rights would effectively tax the land component through the back door, leading to double taxation.
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