The Karnataka High Court has granted interim relief to real estate developer in a writ petition challenging a Goods and Services Tax (GST) adjudication order that raised tax demands on a pre-GST Joint Development Agreement (JDA) and denied Input Tax Credit (ITC) for alleged non-compliance with procedural requirements.
The bench of Justice B.M. Shyam Prasad has permitted the respondents/department to complete pleadings and seek vacation of the interim order or early disposal of the matter.
The petitioner challenged the adjudication order dated March 27, 2026, contending that the GST demand was legally unsustainable as it related to a Joint Development Agreement executed in 2015, well before the introduction of the GST regime.
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Appearing for the petitioner, Senior Advocate V. Raghuraman argued that the transaction under the 2015 JDA merely involved an exchange of interests in immovable property between the developer and the landowner. Since the agreement predated the implementation of GST, the petitioner contended that no GST liability could arise from such a transaction.
The petitioner further submitted that even if the transaction were to be regarded as a “supply” under the GST framework, the levy could not be retrospectively applied to an agreement executed before the GST law came into force.
Apart from disputing the taxability of the transaction, the petitioner also challenged the denial of Input Tax Credit. It was argued that although the company had discharged GST liability at the rate of 12%, the department denied ITC solely because the declaration prescribed under the relevant GST notification had not been filed.
According to the petitioner, the failure to submit the declaration was merely a procedural lapse. The GST notification provides that in the absence of such declaration, a registered person is deemed to have opted for payment of GST at 5% without ITC. The petitioner contended that this procedural omission could not justify denial of ITC after tax had already been paid at the higher rate of 12%.
The petitioner also relied upon an earlier interim order passed by the Karnataka High Court on July 26, 2023, in W.P. No. 16064/2023, where similar issues concerning GST liability under a Joint Development Agreement had been considered by the Court. It was submitted that the present case warranted similar interim protection pending adjudication.
The court granted the interim relief sought by the petitioner. However, the Court clarified that the respondents would be at liberty to complete their pleadings and move an application either for vacating the interim order or for early disposal of the writ petition.
The Court also directed the Registry to list the matter on July 14, 2026, for further proceedings.
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