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Real-estate developers contest 18% GST on Joint Development Agreements.

Posted by admin on April 27, 2024

Real estate developers are contesting the 18% Goods and Services Tax (GST) levy on the transfer of development rights within joint development agreements (JDA) between developers and landowners. They believe the JDA does not involve any sale of land and hence the transfer of the rights is not taxable.  

Earlier this week, a developer filed an appeal in the Supreme Court (SC) against a ruling of a Telangana High Court, which held that JDAs should be taxed. The apex court has issued a notice to Centre to seek its response and will hear the matter on September 9. As no stay has been given on the Telangana High Court order, landowners and the developers will have to pay the taxes after valuing the service till the matter is finally decided.

Essentially, a JDA is a contractual partnership between a landowner and a real estate developer to jointly work on a project on the landowner’s property. In this arrangement, the real estate developer is responsible for constructing the building and related infrastructure while the landowner provides the land. “If land is sold to the third party, GST can be levied. However, in a JDA there is no sale, so it is not taxable,” Sanjay Dutt, managing director, Tata Realty told FE.

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