GST Not Applicable to Development Rights Transfers [Read Order]:

GST Not Applicable to Development Rights Transfers [Read Order] The Bombay High Court's Nagpur bench has decided that GST cannot be charged on the transfer of development rights (TDR) or floor space index (FSI) in development agreements. A company called Shrinivasa Realcon Private Ltd. challenged a notice from the GST department that claimed the company needed to pay GST on TDR based on a 2017 tax notification. The notice referred to clause (5-B) in the notification about "Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI)... for construction of a project by a promoter." TDR allows property owners to transfer unused development rights to another location, usually for money. FSI is a ratio showing how much building area is allowed on a piece of land compared to the land size. According to the case, Shrinivasa Realcon signed an agreement with a landowner in January 2022 to build a multi-story complex on an 8,000 sqft plot for Rs. 7 crore and two flats. The company contended this was not a supply of TDR and pointed out the GST Act does not have a definition of TDR. The GST department tried to connect entry 5-B of the notification to a clause in the development agreement, saying it showed a transfer of TDR that should be taxed. However, the court agreed with the company that a developer's rights in a development agreement are different from TDR or FSI transfers. Therefore, the court ruled that GST cannot be applied to TDR transactions.