Prahitha Constructions Private Limited Vs Union of India (Telangana High Court)
The Hon’ble Telangana High Court in the case of M/s. Prahitha Constructions Private Limited v. Union of India and Ors. [Writ Petition No. 5493 of 2020 dated February 09, 2024] dismissed the writ petition and held that transfer of development rights would be considered as service and is, therefore, subject to levy of GST.
Facts:
M/s. Prahitha Constructions Private Limited (“the Petitioner”) is engaged in the business of conceptualizing, planning, constructing and developing commercial real-estate projects. The Petitioner entered into a Joint Development Agreement (“JDA”) with the land owners for the development of land by constructing towers in the first phase with common facilities.
The Petitioner has filed a writ petition for declaring that the transfer of development rights of land owner to the Petitioner by way of JDA should be treated as sale of land by the land owners and hence the execution of JDA should not be subject to levy of GST. The Petitioner also prayed for declaring Notification No. 4 of 2018-Central Tax (Rate) dated January 25, 2018 (“the Impugned Notification”) as amended by Notification No. 23 of 2019 dated September 30, 2019, imposing GST on transfer of development rights of land by the land owners under JDA is ultra vires to the Constitution of India.
The Petitioner contended that, the execution of JDA is almost like sale of the land which is developed by the Petitioner. The Petitioner further contended that, the Revenue Department (“the Respondent”) cannot compel the Petitioner to pay GST by treating JDA as a transaction of sale of the land.
Issue:
Whether the transfer of development rights would be considered as service under GST Law?
Held:
The Hon’ble Telangana High Court in Writ Petition No. 5493 of 2020 held as under:
