C&M E-ALERT: Bombay High Court Clarifies: GST on Joint Development Agreements triggered only on transfer of possession or rights
- Vikram Sobti
- Oct 11
- 3 min read
The Bombay High Court at Goa, in M/s Provident Housing Ltd v Union of India, clarified that merely signing a Joint Development Agreement (JDA) does not create a liability to pay Goods and Services Tax (GST). The Court held that GST becomes applicable only when possession or rights in the constructed property are actually transferred to the landowner.[1]
Why is GST even applicable to JDAs? |
JDA is a common arrangement in the real estate sector where a landowner and a developer collaborate to develop a property. Typically, the landowner provides the land, and the developer undertakes the construction. In return, the landowner receives a share of the developed property or its proceeds, while the developer gets the right to sell or use the remaining portion. This structure is widely used for large residential and commercial projects in India. Under GST, this is treated as a barter of services:
The developer supplies construction services to the landowner.
The landowner supplies development rights to the developer.
This dual-supply structure has led to confusion about when GST becomes payable and what exactly is being taxed.
What the court held? |
In the Provident Housing case, the tax authorities claimed GST was payable at the time of executing the JDA. The developer deposited INR 7 crore under protest. The Court ruled:
GST is not payable at the time of signing, unless possession or any rights in the constructed property are transferred at that stage.
The taxable event is triggered only when the developer conveys or allots units or rights therein to the landowner.
Since no such transfer occurred upon signing—and the land was later transferred via a separate deed—the Court ordered a refund of the GST deposit, with interest.
What the law and other courts say? |
The rules for GST on JDAs are based on Notification No. 04/2018 – Central Tax (Rate), which explicitly states that GST liability arises only at the time when the developer transfers possession or rights in the constructed property to the landowner, in exchange for development rights.[2] This means that the mere execution of a JDA — which typically outlines mutual obligations but does not effectuate any transfer — does not by itself trigger GST.
This position was reinforced by the Bombay High Court (Nagpur Bench) in Shrinivasa Realcon Pvt. Ltd. v. Deputy Commissioner, where it held that GST could not be levied in the absence of an actual transfer of development rights.[3]
In contrast, the Telangana High Court, in Prahitha Construction Pvt. Ltd. v. Union of India, held that development rights granted under a JDA qualify as a “supply of service” under GST law. However, the ruling did not go into the timing of the tax event, i.e., whether the supply occurs at the time of agreement or upon possession.[4]
These judgments, when read together, clarify two distinct but related questions:
What qualifies as a “taxable supply” under a JDA? (addressed in Prahitha Constructions)
When does GST liability actually arise? (answered in Provident Housing and Shrinivasa Realcon)
They establish that while the grant of development rights may be considered a taxable event, GST liability crystallizes only when those rights are effectively exercised, i.e., when possession or completed units are transferred by the developer to the landowner.
Practical insights for Industry? |
Draft with intent: Ensure JDAs clearly distinguish between “agreement to develop” and actual “transfer of rights” or possession.
Delay liability through structure: Align project milestones and allotments to match the GST trigger event.
Challenge vague demands: GST notices must identify the taxable event, what is being taxed, who is liable, and the rate—failing which, they are open to challenge (Govind Saran Ganga Saran v. CST, Supreme Court).[5]
This ruling is a win for substance over form. It tempers overreach by tax authorities and restores clarity on a complex but widely used real estate structure. While drafting flexibility remains, clarity on timing and structure is now more critical than ever.
[1] M/s Provident Housing Ltd v Union of India, Writ Petition No 5 of 2022 (Bombay High Court, Goa Bench, 21 August 2025).
[2] Notification No. 4/2018 – Central Tax (Rate) date 25 January, 2018
[3] Shrinivasa Realcon Pvt Ltd v Deputy Commissioner, Writ Petition No 7135 of 2024 (Bombay High Court, Nagpur Bench, 8 April 2025).
[4] Prahitha Construction Pvt Ltd v Union of India, Writ Petition No 5493 of 2020 (High Court of Telangana, 9 February 2024).
[5] Govind Saran Ganga Saran v Commissioner of Sales Tax, Civil Appeal No 2083 of 1974 (Supreme Court, 26 April 1985).
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