Win for Real Estate Sector: Bombay HC Rules No GST Without Transfer of TDR or FSI [Read Order]

In a recent judgment, the Bombay High Court (Nagpur Bench) ruled that GST is not applicable under Entry 5B of the GST Notification dated 28.06.2017, as amended, unless there is a transfer of Transferable Development Rights (TDR) or Floor Space Index (FSI).

Shrinivasa Realcon Private Ltd., a real estate developer, filed a writ petition challenging a tax demand notice and a subsequent show cause notice issued by the Deputy Commissioner. The dispute arose from a development agreement dated 07.04.2022, under which the petitioner was appointed by the landowner to develop a multi-storied complex on a plot in Mouza Lendra, Nagpur. In return, the petitioner was to receive Rs. 7 crores and two residential units.

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The GST authorities sought to levy GST on this transaction under Entry 5B, arguing that it involved a transfer of development rights. The petitioner argued that the agreement did not involve any transfer of TDR or FSI as defined under the Unified Development Control and Promotion Regulations of Maharashtra. The petitioner further explained that neither they nor the landowner had purchased any TDR or additional FSI from third parties.

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A division bench comprising Justices Avinash G. Gharote and Abhay J. Mantri examined Entry 5B in detail and observed that it applied strictly to services involving the transfer of TDR or FSI for the purpose of construction by a promoter. The court observed that development rights conferred upon a developer by a landowner under such agreements do not constitute a transfer of TDR or FSI in the regulatory sense.

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The court also clarified that Clause 18 of the agreement, relied upon by the GST department, merely dealt with formalities under the Maharashtra Apartment Ownership Act and could not be interpreted as evidence of TDR transfer.

The court held that the transaction in question did not fall under the ambit of Entry 5B and could not attract GST liability. The show cause notice dated 14.08.2023 and the corresponding order dated 10.12.2024 were quashed. The writ petition was allowed, providing a clear precedent that GST is not applicable in development agreements lacking a transfer of TDR or FSI.

To Read the full text of the Order CLICK HERE

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