This dispute centers on whether the central government has the authority to impose taxes on land sales, as development rights are considered incidental to these transactions.
A significant legal battle has emerged as a real estate developer escalates the issue of Goods and Services Tax (GST) on development rights to the Supreme Court, following a ruling by the Telangana High Court. This dispute centers on whether the central government has the authority to impose taxes on land sales, as development rights are considered incidental to these transactions.
The Telangana High Court previously ruled that joint development agreements should be subject to GST. In response, the Supreme Court has issued a notice to the Union of India, seeking a formal reply. Until a definitive ruling is made, GST will continue to apply to development rights.
The case is being reviewed by a division bench consisting of Justice Sanjeev Khanna and Justice Dipankar Dutta. Representing the real estate company, Abhishek A Rastogi, founder of Rastogi Chamber, argued that the pivotal issue in barter transactions is whether the incidental right to the sale of land should be taxed under GST. He emphasized that the supply of land is excluded from GST and that taxation on land and buildings is typically a state matter.
Rastogi stressed that imposing an additional tax on land sales could jeopardize project viability and lead to tax cascading, considering the tax already levied on subsequent transactions. He also pointed out the complexities in valuing services within this context.
The Supreme Court has scheduled further hearings for September 9. As no stay has been granted, developers and landowners may need to continue paying taxes on the service value until a final decision is reached.
In 2019, the GST Council had formed a Group of Ministers (GoM) to address various issues within the real estate sector, highlighting ongoing challenges and the need for clarity in this area.
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