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GST – Development Agreement – Clause 5B of Notification dated 28.6.2017 – services by way of development rights or FSI for construction of a project

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By the agreement of sale dated 7.1.2022, the petitioner was appointed as developer to develop the land for multi storied complex and two apartments by utilizing the present FSI or increases thereof.  No TDR or FSI has been purchased by the owner or by the developer.

The show cause notice for GST claim was issued under Clause 5B of the Notification dated 28.6.2017 as amended by the Notification dated 29.3.2019.

Clause 5B of the Notification dated 28.6.2017 as amended by the Notification dated 29.3.2019 provides for GST on “services supplied by way of transfer of development rights or FSI for construction of a project”

The transfer of development rights read with FSI would only relate to TDR.   GST Act does not define TDR.  However, it is defined by Regulation 11.2.2 of UDCPR for the State, to mean compensation in the form of  FSI or development rights of owner for construction of built up area.

In that context, it was contended that the agreement of sale for Rs.7 crores has nothing to do with supply of any TDR defined in Regulation 11.2.  It cannot be related to the rights derived from the owner under the development agreement for constructing the building in lieu of transfer of units for consideration by the developer.

HELD that the transaction as contemplated by the agreement dated 7.4.2022 does not fall within Entry No.5B of the Notification dated 2.6.2017 as amended by the Notification dated 29.3.2019.   Therefore, the show cause notices dated 14.8.2023 and 10.12.2024 are quashed.

Order dated 8.4.2025 of the High Court of Bombay, Bench at Nagpur, in Writ Petition No.7135 of 2024 of M/s. Shrinivasa Realcon Private Ltd   Vs.  Deputy Commissioner Anti-Evasion Branch CGST and Central Excise Nagpur & others

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