GST exemption at 18 percent on Joint Development Agreements (JDAs)
Developers argue that imposing tax on projects without land ownership is unreasonable
Petition filed in Supreme Court, notices issued to the center
Developers argue that it is inappropriate to levy 18 percent GST on joint development agreements (JDA) between real estate developers and land owners for the transfer of development rights. It is stated that there is no sale of land in JDAs, therefore it is not appropriate to tax these transfers. A developer has filed an appeal in the Supreme Court against the recent Telangana High Court ruling that tax can be levied on JDAs. It issued a notice to the Centre to explain the matter and adjourned the hearing to September 9. However, since the Supreme Court did not stay the orders of the Telangana High Court, the developers will have to pay GST on the JDAs.
In fact, JDA is an agreement between the land owner and the real estate developer to jointly work on a project. In this the land owner gives the land. The developer looks after the construction of the building and the provision of infrastructure. In this context, Tata Realty Managing Director Sanjay Dutt stated that GST should be levied only when the land is sold to a third party. He opined that real estate development will not be possible due to imposition of GST on JDAs. Due to this, the developers will have to increase the price of the property. As a result, the buyers will be burdened. Many builders claim that it is not reasonable to levy GST on JDAs as they do not have any services. Moreover, they are questioning why GST should be paid as stamp duty is paid on JDAs.
