Telangana HC: ‘Transfer of development rights’ by landowner to developer a service, not outright ‘sale of land’

Telangana HC rules that transfer of development rights (TDR) “is a service” under GST Law which the landowner is offering to Developer and that too for a consideration and thus, same is “not an outright sale” of an immovable property, dismisses realtor’s writ; For the core issue relating to TDR getting covered under Entry 5 of Schedule III of the CGST Act, 2017 which deals with sale of land being not exigible to GST, HC explains how it cannot be brought under the purview of Entry 5; Finding no quarrel to the fact that ownership, title and possession of the property is vested with the landowners and assessee is engaged as an agency by the landowners for the purpose of developing their property into a commercial complex, HC observes that, neither there is “mere transfer of development rights” nor is “automatic transfer of ownership” or title rights over any portion of land belonging to the landowner in favour of the developer; In this vein, HC finds it evident that, Assessee is offering construction services to the landowners in exchange for the landowners transferring the development rights to Assessee and adds that, fact that sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate (CC) of the project, itself would give a clear indication that the services rendered by Assessee in execution of JDA was supplied prior to CC issuance and would thus be amenable to GST; HC elaborates that there are two sets of transactions to be met in its entirety, one is agreement between the landowner and the Assessee and another is the supply of construction services by the Assessee to the landowners and only thereafter sale of constructed area to third party buyers and both these transactions qualify as supplies made u/s 7 of the CGST Act i.e. Construction Services and would attract GST subject to clause (b) of paragraph 5 of Schedule II; Referring to the Notification No.23 of 2019 dated September 30, 2019, which is also under challenge, HC discerns that it deals with the time of supply of services of TDR which was otherwise always taxable, since introduction of GST, has now been postponed.