The Nagpur Bench of Bombay High Court has held that no Goods and Service Tax (GST) is payable on services supplied by any person by way of transfer of land development rights or Floor Space Index (FSI).
The bench of Justice Avinash G. Gharote and Justice Abhay J. Mantri has observed that the TDR / FSI as contemplated by entry 5B, cannot be related, to the rights which a developer derives from the owner under the agreement of development for constructing the building for the owners, in lieu of the owner agreeing to permit the developer to transfer certain built up units for consideration to be appropriated by the developer.
The petitioner questioned the notice, by which the petitioner has been asked to pay the amount of tax as ascertained upon the transaction as contemplated by the agreement of sale under the terms of which the petitioner has been appointed as a developer by the owner, to develop the land admeasuring 8000 sq. ft., Mouza Lendra, into a multi-storied complex for the monetary consideration of Rs.7/- crores and two apartments.
It also challenged the second show cause notice by which GST has been claimed upon the transaction in terms of clause (5-B) of the Notification dated 28th June, 2017 as it stands amended by the subsequent Notification dated 29th March, 2019.
The petitioner contended that the transaction as witnessed by the Agreement of Development dated 7.1.2022 does not fall within the scope and ambit of clause (5-B) so as to attract G.S.T. as all that the clause indicates is a service supplied by any person by way of transfer of development rights or FSI for construction of a project by a Promoter. Prima face, on perusal of the agreement dated 7.1.2022 would indicate that it has nothing to do with supply of any TDR, which is defined under Regulation 11.2 of the Unified Development Control and Promotion Regulations for the State. The GST Act does not define what is meant by Transfer of Development Right (TDR).
The department contended that Entry 5B in the Notification dated 29.03.2019 , to clause 18 of the agreement of development contemplate transfer and therefore, entry 5B would be attracted, so as to permit the respondents to levy GST upon the transaction.
The court while allowing the petition held that the transaction as contemplated in terms of the agreement dated 07.4.2022 does not fall within entry 5B of the Notification dated 28.6.2017, as it stand amended by the Notification dated 29.3.2019, in view of which, neither the show cause notice nor the consequent order, can be sustained and are hereby quashed and set aside.
Case Details
Case Title: M/S Shrinivasa Realcon Private Ltd. Vs. Deputy Commissioner Anti- Evasion Branch, Cgst & Central Excise Nagpur & Others
Case No.: Writ Petition No. 7135 Of 2024
Date: 08/04/2025
Counsel For Petitioner: Mr. A.A. Naik, Senior Advocate With Mr. Abhishek Bhoot
Counsel For Respondent: K.K. Nalamwar
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