Bombay High Court's Decision Reduce Estate cost

Bombay High Court's decision will ease real estate cost pressures, make JDA projects viable. The Bombay High Court stated that GST on JDA projects will only apply to property transfers, reducing costs, alleviating double taxation, and providing homebuyers with better pricing.

Developers have welcomed the Bombay High Court's decision. They say the court's decision will ease cost pressures, improve project viability, and help homebuyers better estimate prices. The court stated in its ruling that the Goods and Services Tax (GST) will only apply to the property transfer stage in Joint Development Agreements (JDAs).

However, legal experts cautioned that clarity is needed on the issue of eligibility for input tax credit, which should be viewed in conjunction with the Supreme Court's decision, as it could be challenged in the Supreme Court.

Mayank Arora, partner at The Chambers of Bharat Chugh, said that given the central government's fiscal share in GST collections, the possibility of an appeal in the Supreme Court cannot be ruled out.

He said, "GST officials themselves have stated that the interpretation upheld in the judgment is the correct position of law, reducing litigation on this issue. However, a final decision has not been made. Given the central government's fiscal share in GST collections, the possibility of an appeal in the Supreme Court cannot be ruled out."

Abhishek Rastogi, founder of Rastogi Chambers, said, "The debate also extends to whether the tax burden, if upheld, should be borne by the landowner or the developer. Furthermore, how can such rights be valued when no separate fee for the so-called service has been considered." After the final determination by the Supreme Court, another layer of complexity will emerge regarding the eligibility of input tax credit, which will have to be tested on the touchstone of efficiency and necessity principles.' He said that while the decision has provided relief to developers, a fact-based investigation will be required, which will make the issue more complex. Pratik Bansal, Partner, White & Brief - Advocates & Solicitors, said that the decision will reduce the financial pressure during the construction period, making the JDA model more attractive. Ayush Mehrotra, Partner, Khaitan & Co, said that this will avoid double taxation.