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2024 (2) TMI 902 - HC - GSTLevy of GST - transfer of development rights of land by the land owners to the petitioner by way of a Joint Development Agreement - sale of land by the land owners or not - covered by Entry 5 of Schedule III of Goods and Services Tax Act, 2017 and the Telangana Goods and Services Tax Act, 2017 - constitutional validity of 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. Whether the transfer of development rights of the immovable property of the landowners can be brought within the scope of GST? - HELD THAT:- Reading of the clauses of JDA reproduced in the preceding paragraphs would by itself reflect that the landowners have bundle of rights attached to his immovable property. One of the rights is that of getting the property developed by engaging an agency of his choice, on his terms and in the manner he deems fit - By virtue of the JDA, the petitioner would have the permission/license to enter into the subject property of the landowners for the purpose of undertaking and execution of the development activities on the said property. In terms of the JDA, upon the petitioner developing the entire property, the landowners would be granting a share in the land proportionate to the built-up area for which the petitioner is entitled towards consideration for the development. It is evident that the petitioner is offering construction services to the landowners in exchange for the landowners transferring the development rights to the petitioner. Only on account of the development rights thus the petitioner gets the right to enter into the land to undertake construction over the said property. The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale - Transferring of the development rights does not result in transfer of ownership rights. The reliance of the circular dated 10.02.2012 i.e. Circular No. 151/2/2012-ST, may not be of any relevance for the dispute in the present writ petition as the same was issued under service tax regime under which service tax was levied only on those services which figured in the specified list of services and where sale of land by the landowner was held to be non-taxable. This definitely does not also say that the transfer of development rights would also automatically become non-taxable. From plain reading of the JDA, what is reflected is that there are two sets of transactions to be met in its entirety. One is agreement between the landowner and the petitioner and another is the supply of construction services by the petitioner to the landowners and only thereafter sale of constructed area to third party buyers. Both these transactions qualify as supplies made and would attract GST subject to clause (b) of paragraph 5 of Schedule II and both these supplies would fall under Section 7 of the GST Act i.e. construction services further read with Entry 5(b) of Schedule II. Under no circumstances can the aforesaid two supplies can be termed as sale of land under Entry 5 of Schedule- III. Notification No. 4 of 2018 dated 25.01.2018 as amended by Notification No. 23/2019-Central Tax (Rate), dated 30.09.2019 deals with the time of supply of services of transfer of development rights which was otherwise always taxable, since introduction of GST, has now been postponed to a time when the petitioner transfers the possession of the constructed/developed area to the landowner. Taking into consideration the provisions of Article 246A of the Constitution of India and also considering the extraordinary powers which have been conferred upon the GST Council and upon whose recommendation the Government has issued the notification clarifying the aspect of transfer of development rights being attracted to GST/TGST, the challenge to the notification issued by the Government of India can be safely held to be devoid of merits. The grounds and contentions raised by the petitioner in respect of the reliefs sought for is not sustainable and the writ petition sans merit and therefore deserves to be and is accordingly, dismissed.
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