The Karnataka High Court has stayed the operation of a GST adjudication order issued under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017, after prima facie accepting the contention that the tax department may have lacked jurisdiction to levy GST on the transfer of development rights (TDR).
The bench of Justice B.M. Shyam Prasad has granted an ad-interim stay of the impugned adjudication order.
The petitioner contended that the impugned proceedings arose out of a transaction involving Transfer of Development Rights (TDR) in immovable property, which, according to the company, is not liable to GST in its hands. The company argued that the adjudicating authority had proceeded without jurisdiction by treating the transaction as taxable under Section 74 of the CGST Act.
Appearing for the petitioner, counsel submitted that the company was merely the owner of the land, while the transaction involved a developer, and therefore the GST demand had been wrongly fastened upon the petitioner.
A key submission before the Court was that even if GST were payable on the transaction, the liability would rest upon the developer under the Reverse Charge Mechanism (RCM) and not upon the landowner.
The petitioner further argued that the authorities could not have initiated proceedings against it for different tax periods between 2019-20 and 2023-24, as the statutory liability, if any, did not fall upon the petitioner.
The petitioner also informed the Court that in an earlier round of litigation involving the same dispute, the Karnataka High Court had already granted interim protection in W.P. No. 14922/2026. A copy of that interim order was placed on record to support the request for similar protection in the present proceedings.
The Court clarified that the respondents are at liberty to complete their pleadings and seek either vacation of the interim order or an early disposal of the writ petition. Until further orders, however, the interim protection will continue to remain in force.
The matter has been directed to be re-listed on August 12, 2026.
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