The Supreme Court has stayed a GST demand on a real estate project executed under a joint development agreement (JDA), a move that could have far-reaching implications for property developers and landowners nationwide. The order, passed in a case involving Arham Infra Developers and Nirmite Buildtech, has reignited debate over whether the transfer of development rights in JDAs constitutes a taxable service under GST or remains exempt as a transfer of land.

JDAs between property developers and landownes are a widely used structure as it allows developers to unlock land without upfront purchase.

The authorities have sought to classify the transfer of land development rights under JDA as a taxable ‘supply of service’ under GST laws. Developers challenge this, arguing that the deal ultimately involve ‘transfer of land’, which is outside the purview of GST, according to a report by The Economic Times.

A top court bench of Justices Aravind Kumar and R Mahadevan, through an order earlier this month, has stayed the operation of an assessment order dated January 27, 2025, passed by the CGST and Central Excise, Nashik-I division against Arham Infra Developers and its associate Nirmite Buildtech.

The bench issued notices to the central government and other respondents named in the developer’s special leave petition, and posted the matter for next hearing within four weeks of the order that was delivered on October 13.

The Bombay High Court had earlier refused to stay the GST demand, holding that the developer should first approach the statutory appellate authority under the CGST Act instead of directly invoking the court’s writ jurisdiction.

The Supreme Court’s interim stay has renewed the debate over taxability of JDAs.

According to legal experts, the matter hinges on the fundamental question of how transfers of land are treated under GST.

“At its core, a JDA is nothing but a structured mechanism for the transfer of land interests,” said Abhishek A Rastogi, founder of Rastogi Chambers. “Statutorily, sale of land is excluded from the purview of GST. When a landowner contributes land to a development project, the substance of the transaction remains the transfer of land or rights in land.”

According to him, merely because the arrangement involves deferred consideration in the form of constructed units, the intrinsic nature of the transaction cannot be converted into a ‘supply of service.’

The attempt to impose GST on development rights effectively taxes the land component through the back door, Rastogi argued.

Such a levy undermines the very legislative intent and results in double taxation, especially when the same units are later taxed at the time of sale, he said.