Bombay HC Gives GST Relief to Homeowners
No GST on Redevelopment If Development Rights Aren’t Sold
By Author | April 24, 2025 | Bombay High Court, GST Recent News – 2025
🧾 Court Ruling on GST in Redevelopment
On April 8, 2025, the Bombay High Court ruled that Goods and Services Tax (GST) will not apply to redevelopment projects where homeowners do not sell development rights to the builder. The court clarified that the absence of a sale of development rights makes GST inapplicable under such joint development agreements (JDAs).
🔍 The Case Background
In most JDAs, a homeowner allows a builder to develop their property in exchange for money or flats. The builder usually charges for construction services, and GST is applied:
- On construction services (forward charge)
- On transfer of development rights (TDR/FSI) (reverse charge)
In this particular case, the homeowner paid ₹7 crore and received two apartments. However, no development rights were sold or transferred. This led to a dispute on whether GST should still apply.
⚖️ Arguments from Both Sides
- The government argued that Entry 5B of the CGST notification makes GST applicable to TDR/FSI even in such cases.
- The builder’s counsel claimed no TDR or FSI had been transferred, and thus GST under RCM should not be imposed.
✅ Court’s Decision
The High Court sided with the builder. It ruled that GST is not applicable if development rights are not sold or transferred. This verdict is expected to ease the tax burden on homeowners involved in similar redevelopment projects.
📈 Broader Implications
This judgment provides clarity in redevelopment agreements where:
- Development rights are retained by the homeowner
- No explicit sale or transfer of rights takes place
Although the ruling applies to similar factual circumstances, it sets an important precedent that may influence future real estate tax disputes.
📌 Conclusion
The Bombay High Court’s verdict brings welcome relief to many homeowners and developers. While the GST framework still holds for regular JDAs involving TDR or FSI sales, this ruling carves out an exception when no development rights are sold.
