🏛️ No TDR, No GST: Bombay HC Quashes Tax Demand on Real Estate Project
By Author | April 30, 2025
⚖️ Court Ruling: No Tax Without TDR
The Nagpur bench of the Bombay High Court has quashed a GST demand against a real estate developer. According to the court, the construction project did not involve any transfer of development rights (TDR). As a result, it is not taxable under the relevant GST provision.
📁 Background of the Case
The developer, M/s Shrinivasa Realcon Pvt. Ltd., signed a development agreement on April 7, 2022. Under this agreement, the firm was appointed to build a residential complex on an 8,000 sq ft plot in Mouza Lendra.
In exchange, the landowner agreed to pay ₹7 crore and give two flats to the developer.
Later, the GST department issued a show-cause notice on August 14, 2024, followed by a final GST order on December 10, 2024.
🧾 Developer’s Argument
The developer’s legal team argued that the project did not involve any external sale or TDR. The construction used only the FSI already available on the land. In some cases, it included additional space permitted by local authorities.
They also clarified that there was no sale or transfer of extra FSI or TDR from the landowner.
📑 Why the Court Rejected GST Demand
The GST department relied on Entry 5B of the 2017 notification, amended in 2019. This entry allows tax on services that include a transfer of development rights or FSI.
However, the court noted that GST law does not define what exactly constitutes a “transfer of development rights.”
Additionally, the court referred to the Unified Development Control and Promotion Regulations, which define TDR as compensation given by a planning authority. This definition did not apply in the current case.
Moreover, the development agreement did not mention any TDR-related terms. The department’s argument based on Clause 18 of the agreement was also dismissed. That clause deals with compliance under the Maharashtra Apartment Ownership Act and had no link to TDR.
✅ Final Verdict
The judges concluded that the transaction did not fall under Entry 5B. Therefore, the GST demand could not be justified.
The court set aside both the show-cause notice and the final tax order. This ruling brings relief to the developer and sets a precedent for similar real estate cases.
