The Supreme Court has stayed a Goods and Services Tax (GST) demand raised on a real estate project executed under a Joint Development Agreement (JDA), a move that could have far-reaching implications for developers and landowners across India.
A bench comprising Justices Aravind Kumar and R. Mahadevan passed the interim order earlier this month, staying the operation of an assessment order dated January 27, 2025, issued by the CGST and Central Excise, Nashik-I Division against Arham Infra Developers and its associate Nirmite Buildtech. The apex court also issued notices to the Central Government and other respondents in the developer's special leave petition (SLP), listing the matter for the next hearing within four weeks of the October 13 order.
Background: GST Controversy Over Development Rights
Joint Development Agreements are a popular model in the real estate sector, allowing landowners to contribute land while developers undertake construction, sharing the completed units or profits thereafter. However, the tax treatment of development rights under GST has remained contentious.
The tax authorities have been treating the transfer of development rights (TDR) as a taxable supply of service, arguing that it falls under the ambit of the GST law. Developers, on the other hand, maintain that land transfers are specifically excluded from GST under Schedule III of the Central Goods and Services Tax (CGST) Act, 2017, which lists activities neither considered as supply of goods nor services.
Bombay High Court's View and Supreme Court Intervention
Earlier, the Bombay High Court had declined to stay the GST demand, holding that the developer should first pursue remedies before the statutory appellate authority under the CGST framework instead of invoking writ jurisdiction.
However, the Supreme Court's interim stay has revived the debate over how JDAs are treated under GST and whether the grant of development rights can truly be viewed as a taxable service.
Experts: Core Issue Is the Nature of the Transaction
According to tax experts, the crux of the issue lies in whether a JDA transaction represents a transfer of land or a supply of service.
"At its core, a JDA is a structured mechanism for transferring interests in land," said a senior tax professional. "The sale of land is outside the scope of GST. When a landowner contributes land in return for constructed units, the essence of the transaction remains the transfer of land or rights in land."
Experts further argue that levying GST on development rights effectively amounts to taxing land indirectly, which defeats the legislative intent and can lead to double taxation, first when rights are transferred and again when the final units are sold.
Implications for Real Estate Developers and Landowners
The case carries wide implications for the real estate sector, where JDAs are the dominant structure for redevelopment and greenfield projects, especially in metro and tier-1 cities.
Legal analysts note that the Supreme Court's stay order underscores the judiciary's evolving stance on the GST applicability to complex land transactions, with several High Courts across states issuing divergent rulings.
In August 2025, the Goa Bench of the Bombay High Court held that no GST is payable once the land ownership transfers to the developer, providing clarity on when tax liability arises under such agreements.
Conclusion
With the matter now before the Supreme Court, the real estate industry will keenly watch how the apex court interprets the nature of JDAs and the legislative boundaries of GST. The final ruling is expected to set a crucial precedent for thousands of similar projects currently under dispute or departmental scrutiny.
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