Bombay High Court Quashes GST Demand On Developer Over Redevelopment Deal
Judges Rule Transaction Not Covered Under Transfer Of Development Rights Clause
The Bombay High Court (Nagpur Bench) has delivered relief to a city-based real estate developer, ruling that a redevelopment agreement does not attract GST liability under Transfer of Development Rights (TDR) provisions.
A division bench of Justice Avinash G. Gharote and Justice Abhay J. Mantri, in its order dated April 8, 2025, allowed a petition filed by M/s Shrinivasa Realcon Private Ltd. against the Deputy Commissioner, Anti-Evasion Branch, CGST & Central Excise, Nagpur. The Court quashed show-cause notices and orders demanding GST on the firm’s redevelopment project.
The Dispute
The petitioner entered into a development agreement dated April 7, 2022, with a landowner for a plot measuring 8,000 sq. ft. at Mouza Lendra, Nagpur. Under the agreement, the developer was to construct a multi-storied complex in exchange for ₹7 crore and two apartments.
Authorities, however, issued a show-cause notice on August 14, 2024, claiming GST liability under Entry 5B of the Notification dated June 28, 2017, as amended in 2019. Officials argued that the deal amounted to a transfer of development rights or additional FSI, thereby attracting GST.
Court’s Analysis
The bench rejected this interpretation. It held that Entry 5B applies only to services involving a transfer of development rights (TDR) or floor space index (FSI) as compensation. The Court noted that the GST Act does not define TDR, but the Unified Development Control and Promotion Regulations for Maharashtra define it strictly in terms of compensation via FSI.
In this case, the Court observed:
- No TDR or FSI was purchased by either the owner or the petitioner.
- The development rights were contractual, not compensatory in the sense contemplated by Entry 5B.
- Clause 18 of the agreement, cited by the department, merely dealt with execution of deeds under the Maharashtra Apartment Ownership Act, 1970, and could not be stretched to imply TDR transfer.
Final Order
Finding that the transaction did not fall under Entry 5B, the High Court quashed the show-cause notice dated August 14, 2023, and the consequential order dated December 10, 2024.
The writ petition was allowed, providing major relief to the developer. The bench also made it clear that taxing authorities must apply GST provisions strictly and cannot widen their scope beyond statutory definitions.
