Developer moves apex court challenging GST on development rights

The case was heard by a division bench of Justice Sanjeev Khanna and Justice Dipankar Dutta.
The Supreme Court of India premises in New Delhi.
The Supreme Court of India premises in New Delhi.File Photo | PTI

NEW DELHI: A developer has taken the issue of GST on development rights to the Supreme Court after a ruling by the Telangana High Court. The dispute arises from whether the central government has the authority to impose taxes on the sale of land, as development rights are considered incidental to land sales.

The Telangana High Court decided that joint development agreements should be taxed. The Supreme Court has issued a notice to the Union of India to respond. Until a final decision is reached, GST will continue to apply to these rights. The case was heard by a division bench of Justice Sanjeev Khanna and Justice Dipankar Dutta.

Abhishek A Rastogi, founder of Rastogi Chamber, representing a real estate company, argued that the crucial issue in a barter transaction is whether the incidental right to the sale of land should be subject to GST, given that the supply of land is excluded from GST and taxation on land and building is a state matter.

Rastogi emphasised that subjecting the sale of land to additional tax could render projects unviable and create tax cascading due to the tax already imposed on the second part of the transaction.

The case is scheduled for further hearing on September 9, with no stay granted by the Supreme Court, suggesting that landowners and developers may need to pay the taxes on the service value until a final decision is reached.

Rastogi also highlighted the challenge of valuing services in this context. The GST Council in 2019 had also formed a Group of Ministers (GoM) to address issues related to real estate sector.

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