In between an ongoing legal battle on the GST application for Joint Development Agreement (JDA) in the real estate sector, the GST Council is anticipated to look into the problems, as the Group of Ministers recommended, on September 9 2024.
It is anticipated that a GoM is likely to meet this week. The key terms of reference are to analyze distinct GST imposed on the transfer of development rights in the Joint Development Agreement and recommend an appropriate model.
The GST council based on the GoM suggestions of the same, would regard distinct options, as per the senior government official. On September 9 the council is scheduled to meet.
The 7 GoM will be convened by the Goa Chief Minister, Parmod Sawant with Deputy Chief Ministers of Maharashtra and Bihar, Ajit Pawar and Samrat Choudhary, serving as members. Other members include Suresh Khanna (Finance Minister, Uttar Pradesh), Harpal S Cheema (Finance Minister, Punjab), Kanubhai Desai (Finance Minister, Gujarat) and K N Balagopal (Finance Minister, Kerala).
GoM directed to analyze and recommend the composition scheme or any other scheme, to enhance the real estate sector. It ought to analyze the legality of land or any other ingredient, in composition and propose a valuation mechanism.
JDA is a legal agreement that permits the owner of the land and the developers to come together to make a project on the former’s land. JDA is a common form of real estate development in various sectors in India. Two options are there for the taxation.
One is at the time of the pre-March 31, 2019 under which the 18% GST is subjected to be applied with the input tax credit (ITC). The second option, for agreements entered after April 1, 2019, is 1.5/7.5 per cent without imposing ITC. Several rulings by the Authority for Advance Rulings (AAR) have kept the GST applicability.
The Telangana High Court before had dismissed the writ petition that the realtor filed contesting the GST on the ‘transfer of land development rights’ (TDR) on a JDA for the residential projects. The same ruled the notification valid that levied the GST on JDA.
The applicant Prahitha Construction Private Limited, moved the High Court requesting that when the land has transferred to the developer via the owner of land under JDA then it must not levy GST. Contending that the GST on the development rights transfer by the land owner under a JDA is significantly identical to the land sale, which does not draw GST.
It was stressed by the court that the transfer of the right to develop under a joint development agreement would levy tax under GST as the land transfer itself is waived from GST.
The case has arrived in the Supreme Court where the ruling has been contested. The Supreme Court did not grant a stay on the GST in the first hearing of the case. September 9 is the next date of the hearing.
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