GST Payable on Development Rights Acquired Post-GST

By Centax

May 31, 2025

• 2 min. read

Case Details: Shashi Ranjan Constructions Pvt. Ltd. Versus Union of India (2025) 30 Centax 156 (Pat.)

Judiciary and Counsel Details

Rajeev Ranjan Prasad & Ashok Kumar Pandey, JJ.
Shri D.V. Pathy, Sr. Adv. for the Petitioner.
Dr. Krishna Nandan Singh, ASGI, S/Shri Anshuman Singh, Sr. SC, CGST & CX, Shivaditya Dhari Sinha, Alok Kumar, Advs. & Vikash Kumar, SC-11 for the Respondent.

Facts of the Case

The petitioner, a real estate developer, entered into a development agreement with a landowner prior to the introduction of GST laws, whereby the petitioner undertook to construct a multi-storied building and, in return, was to receive a portion of the built-up area as consideration. The project was completed and the completion certificate was issued post GST. Pursuant to assessment, an order was passed against the petitioner determining a total GST liability along with applicable interest on account of transfer of development rights.

The petitioner challenged the order before the Patna High Court, contending that since the agreement was executed prior to the GST regime and the completed flats represented immovable property, the activity fell outside the scope of ‘supply’ under Section 7 of the CGST and Bihar GST Act, 2017. The petitioner further submitted that such transfer of constructed property post-completion should be treated as a transaction in land and building, and therefore, outside the ambit of GST.

High Court Held

The Hon’ble Patna High Court held that the petitioner did not acquire any rights in the property until the completion certificate was issued, and only thereafter became entitled to dispose of or sell the developed area received under the agreement. It was observed that the transfer of development rights constituted a taxable supply under Section 7 of the CGST and Bihar GST Act, 2017, and could not be equated with a sale of land. The Court also affirmed the applicability of GST on a reverse charge basis on construction services received in exchange for development rights and noted that there was no ambiguity regarding the petitioner’s tax liability. Consequently, the Court declined to interfere with the impugned order and dismissed the petition.