Gujarat High Court stays GST on TDR sales: Big relief for realtors
The Gujarat High Court recently delivered a major relief to real estate developers by staying the levy of GST on the sale of Transferable Development Rights (TDR). This ruling puts a temporary hold on the Central and State GST authorities from enforcing tax on TDR transactions — a move that could reshape real estate taxation in India.
Focus Keyphrase: GST on TDR sales
What is TDR and why was GST levied on it?
Transferable Development Rights (TDR) are rights given to landowners or developers, allowing them to construct more than normally permissible under zoning laws. These rights are often bought and sold in the real estate sector — especially in cities like Mumbai, Pune, and Ahmedabad.
The GST department, based on Notification No. 04/2019-CT (Rate) dated 29.03.2019 and subsequent clarifications, considered TDR a supply of service and levied GST under Section 7 of the CGST Act, 2017, triggering compliance demands and litigation.
What did the Gujarat High Court say?
In the case of Cosmos Realtors vs Union of India & Others (Special Civil Application No. 15603 of 2023), the Gujarat High Court issued a stay on the recovery of GST on the sale of TDRs.
Key directions of the Court:
- No coercive action to be taken by tax authorities regarding GST on TDR.
- The Court observed prima facie that the sale of TDR may not involve supply of service for consideration.
- Final hearing is still pending, but interim relief offers a breather to developers.
Impact of Gujarat HC stay on GST on TDR sales
| Aspect | Before Stay | After Stay (Interim) |
|---|---|---|
| Taxability | Treated as supply under GST | Temporarily stayed |
| Tax rate | 18% on market value | Not applicable (interim stay) |
| Developer’s compliance burden | High | Lowered until final judgment |
| Sale structure risk | High litigation risk | Reduced for now |
Legal references and expert view
- Relevant Notification: Notification No. 04/2019-CT (Rate)
- Relevant CGST Sections: Section 7 (definition of supply), Schedule II, Entry 5
- Case law: Cosmos Realtors vs UOI (SCA 15603/2023)
- Expert tip: “If you are a builder planning to transfer or acquire TDR, it is advisable to keep all sale agreements and municipal approvals properly documented in anticipation of final judgment,” says CA Mitesh Shah, Ahmedabad-based tax expert.
What should developers do now?
- Avoid hasty payments: Wait for final court directions or CBDT/CBIC clarification
- Document all TDR transactions: Keep legal agreements, payments, and approvals ready
- Consult a tax professional: Review potential GST exposure on past and upcoming TDR deals
- Keep track of similar cases: Courts in other states may take differing views
Will this benefit apply across India?
Currently, this stay order is applicable only in Gujarat. However, it sets a strong precedent. If similar petitions are filed and accepted in other states, it could lead to uniform interpretation or CBIC policy revision.
GST on TDR sales: Frequently Asked Questions (FAQs)
Q1. Is TDR exempt from GST after this judgment?
No. The stay is only interim. It does not amount to exemption but temporarily stops enforcement.
Q2. What if I already paid GST on TDR?
You may claim refund subject to the final court order or file a writ petition based on the Gujarat HC precedent.
Q3. Does this apply to landowners too?
Yes, any party transferring or receiving TDR under development agreements may be affected.
Summary
Gujarat High Court stays GST on TDR sales in the Cosmos Realtors case, offering interim relief to developers. The order questions whether TDR constitutes a taxable supply, putting a temporary freeze on GST enforcement. This could reshape real estate taxation if upheld across India.