GST Council to Review Joint Development Agreement (JDA) Taxation in Real Estate Sector on September 9

By: Admin | August 21, 2024 | Categories: GST Recent News | 4 Min Read

Amid ongoing legal disputes about GST on Joint Development Agreements (JDA) in the real estate sector, the GST Council will review the issue on September 9, 2024. This review follows a recommendation from the Group of Ministers (GoM).

According to a senior government official, “The GoM will likely meet this week to examine the various aspects of GST on the transfer of development rights in JDAs. They will then propose a suitable model. Afterward, the GST Council will review the GoM’s recommendations during its upcoming meeting.”

GoM Composition

Goa Chief Minister Pramod Sawant leads the seven-member GoM. Other members include:

  • Ajit Pawar (Deputy Chief Minister, Maharashtra)
  • Samrat Choudhary (Deputy Chief Minister, Bihar)
  • Suresh Khanna (Finance Minister, Uttar Pradesh)
  • Harpal S Cheema (Finance Minister, Punjab)
  • Kanubhai Desai (Finance Minister, Gujarat)
  • K N Balagopal (Finance Minister, Kerala)

The GoM will also investigate the introduction of a composition scheme or other mechanisms designed to boost the real estate sector. Additionally, they will review the legality and valuation methods for land or other components within the composition scheme.

Background on JDAs

A Joint Development Agreement (JDA) is a legal arrangement where landowners and developers work together to build projects on the landowner’s property. Currently, two GST taxation models apply:

  1. Pre-March 31, 2019: GST of 18% with input tax credit (ITC).
  2. Post-April 1, 2019: GST of 1.5% or 7.5% without ITC.

Several Authority for Advance Rulings (AAR) decisions have confirmed GST applicability on JDAs.

Recent Legal Developments

In February 2024, the Telangana High Court dismissed a writ petition from Prahitha Construction Private Limited. The company had challenged the GST on transferring land development rights under a JDA for residential projects. The Court decided that while land transfers remain GST-exempt, the transfer of the right to develop land under a JDA is taxable.

Consequently, this ruling has faced a challenge in the Supreme Court. Although the Court did not issue a stay on the GST during its initial hearing, it scheduled the next hearing for September 9, 2024.

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https://aaermlawassociates.com/gst-jda-taxation-review-sept-2024/

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