No GST at the time of entering into a JDA but, will arise at transfer/possession via conveyance/allotment letter only with actual transfer under conveyance

The Bombay High Court has ruled that Goods and Services Tax (GST) is not applicable at the time of signing a Joint Development Agreement (JDA). Liability only arises when the developer actually transfers possession or rights to the property through a conveyance or allotment letter. The court also noted that the developer had become the property owner via a subsequent sale deed, extinguishing all prior JDA claims, and ordered a refund of overpaid GST with interest.

The Hon'ble Bombay High Court in the case of Provident Housing Ltd. v. Union of India & Ors. [Writ Petition No. 5 of 2022, order dated August 21, 2025] held that there is no GST liability on the developer under a Joint Development Agreement (JDA) when the developer becomes the owner of the property pursuant to conveyance, rendering all prior claims under the JDA extinguished.

Facts:

Provident Housing Ltd. ('the Petitioner') is a real estate developer that entered into a Joint Development Agreement ("JDA") with Trinitas Realtors India LLP (the landowner) on 13.10.2017, for construction of a residential project.

Union of India & Ors. ("the Respondent"), including GST authorities, demanded GST at 12% on construction services allegedly supplied at the date of entering into the JDA, relying on then-applicable legislation and notifications. The Petitioner thus deposited ₹7 crores under protest.

The Petitioner contended that no GST was payable at the time of entering into the JDA; that, as per Notification No. 4/2018-Central Tax (Rate), liability arises only upon transfer/possession via conveyance/allotment; and, post-transfer, they had become property owner and all JDA rights and obligations stood extinguished by mutual agreement and sale deed. The Petitioner also argued that any proceedings for earlier periods were time-barred under Section 73, 74, and 75 of the CGST Act.

The Respondent contended that as per law and notifications in force at the relevant time, GST became payable at the signing of JDA; that later notification had no retrospective effect; and that, at minimum, the developer was liable when entering the JDA.

Aggrieved by the demand the Petitioner sought relief by writ petition under Article 226, seeking refund of the ₹7 crores and a declaration against GST liability on the JDA.

Issue:

Whether GST liability arises on the date of entering into a JDA or only upon actual transfer of possession/property by the developer via conveyance or similar instrument, particularly after subsequent conveyance and extinguishment of all JDA claims?

Held:

The Hon'ble Bombay High Court in Writ Petition No. 5 of 2022 held as under:

· Observed that, the government, by subsequent Notification No. 4/2018-Central Tax (Rate), dated January 25, 2018, clarified that GST liability for both landowner and developer, under a JDA arises only upon transfer of possession or a right in the completed structure by conveyance/allotment or similar instrument, not on signing of the JDA.

· Noted that, the Revenue, in its latest affidavit, accepted this position and acknowledged no GST liability arose at the date of the JDA in light of the Rate Notification - 4/2018-Central Tax

· Noted further that, by mutual agreement and a subsequent sale deed, the landowner had sold the entire land to the developer, with all claims and rights under the JDA expressly extinguished, eliminating any GST-triggering supply under the original JDA.

· Held that no proper GST adjudication order or notice was issued within prescribed limitation under Sections 73, 74, and 75; thus, all adjudication proceedings were statutorily concluded.

· Directed the Revenue to refund the amount of ₹7 crores with 6% interest per annum from the date of deposit within six weeks of order.

Our Comments:

The Court's reasoning is grounded in the explicit language of Notification No. 4/2018-Central Tax (Rate), in line with CBIC clarifications and evolved jurisprudence that seeks to tax only the substantive event-i.e., transfer of possession/rights and not the mere signing of a developmental agreement.

Relevant Provisions:

Notification No. 4/2018-Central Tax (Rate), dated January 25, 2018

"…hereby notifies the following classes of registered persons, namely :- (a) registered persons who supply development rights to a developer, builder, construction company or any other registered person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure; and

(b) registered persons who supply construction service of complex, building or civil structure to supplier of development rights against consideration, wholly or partly, in the form of transfer of development rights,

as the registered persons in whose case the liability to pay central tax on supply of the said services, on the consideration received in the form of construction service referred to in clause (a) above and in the form of development rights referred to in clause (b) above, shall arise at the time when the said developer, builder, construction company or any other registered person, as the case may be, transfers possession or the right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter)"

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