The transfer of development rights under a Joint Development Agreement does not constitute a sale of land and is subject to GST.

ORDER :(per Hon’ble Sri Justice P.SAM KOSHY)

The instant writ petition has been filed by the petitioner which is a company engaged in the business of construction activities. The relief sought for in the instant writ petition is for a direction by way of a writ of Mandamus declaring that the transfer of development rights of land by the land owners to the petitioner by way of a Joint Development Agreement (for short ‘JDA’) should be treated as sale of land by the land owners and hence the execution of the said agreement should not be subjected to levy of GST. That it should be covered under Entry 5 of Schedule III of Goods and Services Tax Act, 2017 (for short ‘GST Act, 2017’) and the Telangana Goods and Services Tax Act, 2017 (for short ‘TGST Act, 2017’). The incidental relief also sought for is issuance of a writ of Mandamus declaring the Notification No.4 of 2018-Central Tax (Rate) (Annexure P1) dated 30.09.2019 imposing GST on transfer of development rights of land by the land owners under a JDA be ultra vires the Constitution of India.

2. Heard Sri S. Ravi, learned Senior Counsel for the petitioner and Sri Dominic Fernandes, learned Senior Standing Counsel for CBIC appearing for the respondent-Department.

3. For better understanding of the dispute, it would be relevant at this juncture to briefly note the facts which led to filing of the instant writ petition which are as under:

3.1. The petitioner M/s. Prahitha Constructions Private Limited had entered into a JDA with M/s. Jitvan Land Limited and M/s. Janina Marine Properties Private Limited who are the land owners. The JDA was for development of the land belonging to the land owner Nos.1 and 2 in the JDA admeasuring 8.30 acres forming part of plot Nos.9, 10A and 10B in Survey No.83/1 situated at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana, and also land admeasuring 1.82 acres forming part of plot No.8B2 in Survey No.83/1 situated at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana. The two plots have to be developed as one composite block which for convenience sake has been referred as “scheduled property” which stands marked as Annexure P1 in the JDA.

3.2. The petitioner is expert in the business of conceptualizing, planning, constructing and developing commercial real-estate projects. The petitioner herein is the developer of the land belonging to M/s. Jitvan Land Limited and M/s. Janina Marine Properties Private Limited by virtue of the JDA which was executed on 28.12.2017. By virtue of the said JDA, there were certain conditions and agreements entered into between the parties. The petitioner had agreed for development of the subject property by constructing three towers of the annexed building in the first phase with modern, common amenities and facilities. The JDA was required to be executed within a given deadline period as per the terms. The provisions of the GST law which came into force with effect from 01.01.2017 excludes levy of GST in respect of