Case Details: Shrinivasa Realcon Pvt. Ltd. Versus Deputy Commissioner Anti-Evasion Branch, CGST & Central Excise Nagpur (2025) 29 Centax 298 (Bom.)
Judiciary and Counsel Details
- Avinash G. Gharote & Abhay J. Mantri, JJ.
- S/Shri A.A. Naik, Sr. Adv. & Abhishek Bhoot, Adv. for the Petitioner.
- Shri K.K. Nalamwar, Adv. for the Respondent.
Facts of the Case
The petitioner, a developer, entered into a development agreement with the landowner, wherein the petitioner was appointed to develop a plot of land into a multi-storied complex. The agreement provided for a monetary consideration and two apartments, with the petitioner being granted the right to transfer certain built-up units for consideration. Subsequently, the petitioner received a show-cause notice from the authorities, demanding GST on the transaction, invoking clause (5B) of Notification No. 13/2017-Central Tax (Rate), dated 28-06-2017, as amended by Notification No. 5/2019-Central Tax (Rate), dated 29-03-2019. This provision concerns the transfer of development rights (TDR) or Floor Space Index (FSI) for construction projects by promoters. The petitioner contested the notice, arguing that the transaction did not fall within the scope of clause (5B), as the agreement did not involve the transfer of TDR or FSI, but rather was a development agreement for the construction of a building, with no TDR or FSI involved as per the Unified Development Control and Promotion Regulations (UDCPR) of Maharashtra.
A second show-cause notice was issued, reinforcing the GST demand, with the respondents claiming that the transaction could be categorized under clause (5B) of the Notifications. Aggrieved by the issuance of both the show-cause notices and order the petitioner approached Bombay High Court.
High Court Held
The Bombay High Court held that the expression ‘transfer of development rights’ in conjunction with ‘FSI’ as indicated in entry 5B of Notification No. 13/2017-Central Tax (Rate), dated 28-06-2017, applies only to TDR as defined in clause 11.2.2 of the Unified Development Control and Promotion Regulations for the State of Maharashtra (UDCPR). According to UDCPR, TDR refers to compensation in the form of FSI or development rights, which entitles the landowner to construct built-up area. The Court clarified that TDR/FSI, as contemplated by entry 5B, does not apply to the rights a developer derives from the landowner under a development agreement for constructing a building, in exchange for the right to transfer certain built-up units. Therefore, the Court concluded that GST could not be levied on the transaction and quashed the impugned notices.
List of Notifications Cited
- Notification No.13/2017-Central Tax (Rate), dated 28-6-2017
- Notification No.5/2019- Central Tax (Rate), dated 29-3-2019
