Supreme Court Stays GST Demand on Real Estate Joint Development Agreements
The Supreme Court has granted a temporary stay on GST demands related to joint development agreements (JDAs) in real estate, potentially reshaping the landscape for developers and landowners.
GstReal EstateJoint Development AgreementSupreme CourtLand Development RightsReal Estate MumbaiOct 30, 2025
The Supreme Court bench, comprising Justices Aravind Kumar and R Mahadevan, 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 delivered on October 13.
JDAs between property developers and landowners are a widely used structure as it allows 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 challenge this, arguing that the deal ultimately involves the 'transfer of land,' which is outside the purview of GST.
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.'
According to him, 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, Rastogi argued. Such a levy undermines the very legislative intent and results in double taxation, especially when the same units are later taxed at the time of sale, he said.
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)?
A Joint Development Agreement (JDA) is a legal contract between a property developer and a landowner, where the developer agrees to construct a project on the landowner's property in exchange for a share of the developed units or other agreed-upon benefits.
Why did the Supreme Court stay the GST demand?
The Supreme Court stayed the GST demand to allow for a thorough examination of the legal issues surrounding the classification of land development rights under JDAs as a taxable service under GST laws.
What is the significance of this ruling for the real estate industry?
This ruling is significant because it could set a precedent for how GST is applied to joint development agreements, potentially affecting the financial structures and tax liabilities of real estate projects across the country.
What is the argument against taxing JDAs under GST?
Developers argue that the transfer of land development rights under JDAs is essentially a transfer of land, which is outside the purview of GST. They contend that taxing these rights as a service would result in double taxation and undermine the legislative intent of GST laws.
What was the previous ruling by the Bombay High Court?
The Bombay High Court had previously refused to stay the GST demand, suggesting that developers should first approach the statutory appellate authority under the CGST Act before invoking the court's writ jurisdiction.
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