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JDAs Not Exempt from GST: Telangana HC

The Telangana High Court in a recent judgment clarified that Joint Development Agreements (‘JDA’) between developer and landowner do not transfer ownership rights but only grant development rights to developer. The petitioner’s case, in summary, was that JDA results in transfer of ownership in land and the GST exemption for ‘sale of land’ under Entry 5, Schedule III, CGST Act, 2017 will be applicable to JDAs. The State’s case for bringing JDA within the fold of GST relied on Entry 5(b), Schedule II, CGST Act, 2017 which inter alia makes construction services amenable to GST.  The High Court clarified that transfer of ownership only takes place via a conveyance deed after the developer has completed the obligations under JDA, and JDA itself does not transfer title in the land.  

Facts and Arguments 

The petitioner claimed that the transfer of development rights in its favor by the landowner via JDA should be treated as sale of land by the landowners and the execution of JDA should not be subjected to GST. 

The petitioner’s arguments were that the execution of JDA was ‘almost like a sale of land’ and that JDA needs to be considered holistically without focus on individual clauses as it enabled the landowner to transfer the land to the petitioner. The petitioner’s case was that by execution of JDA itself there is substantive transfer of development rights in favor of the petitioner which results in sale of land proportionate to the amount of investment made by the developer. And since JDA gives rise to an element of sale of land the statutory embargo on levy of GST on sale of land would be applicable. 

The petitioner’s ancillary argument was that Notification via which GST was imposed on transfer of development rights should be declared as ultra vires the Constitution. The petitioner’s argued that the Notification traversed beyond the four corners of the law. The absence, in CGST Act, 2017, of any specific provision, mechanism or machinery to determine the quantum of tax payable on JDA was emphasised to argue that the Notification being a delegated legislation traversed beyond the parent legislation.  

The State contended that the petitioner’s entire case lacked any foundation. The State referred to the clauses of JDA to argue that ownership, title rights on the land were retained by the owner and the petitioner was only granted the development rights on the land which belonged to the landowner. The State added that none of the clauses of JDA indicate that the JDA which gives petitioner right to develop the property also effectuates an outright sale of land from the landowner to the petitioner. 

Telangana High Court Decides 

The Telangana High Court correctly rejected the petitioner’s arguments and concluded that execution of JDA does not result in an outright sale of land. The High Court’s conclusion was primarily dependent on its examination of the terms/clauses of JDA and their implication.  

The Telangana High Court opined that an owner of immovable property has a bundle of rights one of which is to get the property developed by an agent of its choice on the terms and conditions that they deem fit. The High Court noted that under the JDA, the petitioner would get the licence/permission to enter the landowners’ property for execution of its development activities. And after the petitioner develops the entire property, the landowner would grant to the petitioner a share in the land proportionate to the built-up area for which petitioner is entitled. (paras 24 and 25) 

The Telangana High Court also noted that the JDA clearly stipulated that in event of default on the petitioner’s part, all the rights on the property remained with the landowner. This stipulation in favor of the landowner, as per the High Court, was an indication that the title over the property on the date of execution of JDA remained with the landowner and not with the petitioner. (para 26) 

The Telangana High Court referred to another clause of JDA which stipulated that on completion of development, the petitioner was to transfer possession of the completed units to the landowner. Thereafter, the landowner would sign conveyance deed with the petitioner to transfer the undivided share of land towards investment, efforts, cost of construction incurred by the petitioner in developing the land. The High Court correctly interpreted the terms of JDA to note that under a JDA, the petitioner offered construction services to the landowner. And for the said services the landowner transferred development rights to the petitioner and the same cannot be equated with outright sale of land. Based on the above reading of the various clauses of JDA, the High Court concluded that:    

From plain reading of the JDA that was entered into between the two parties, what is apparently visible is that, there was no outright sale of land being effectuated and the JDA per se cannot be considered merely as a medium adopted by the landowner selling his land and the JDA does not lead to sale of land by itself. After the entire development activities are carried out for the investment made by the petitioner for realizing what he has invested, he would be permitted to sell/dispose of certain developed properties constructed in execution of the JDA. (para 29)

The High Court further reinforced its conclusion by observing that the transfer of undivided land in favor of the petitioner only happens after issuance of the completion certificate indicating that the services rendered by the petitioner in execution of JDA were supplied prior to issuance of competition certificate and were amenable to GST. The High Court was here impliedly referring to Entry 5(b), Schedule II, CGST Act, 2017 which makes construction services amenable to GST when they are provided before issuance of completion certificate. 

As regards the petitioner’s challenge to the validity of Notification, the High Court noted that Notification does not create a charge but only states the time at which the GST is payable is when the developed area is transferred by the petitioner to the landowner and not at the time of execution of JDA. And the Notification did not suffer from the vice of excessive delegation.  


The Telangana High Court’s interpretation and understanding of JDA is correct. The petitioner’s contention that execution of JDA itself transfers ownership rights was incorrect as the various stipulations in JDA made it evident that the transfer in title only happens once the developer has fulfilled the obligations of developing the land in question. The petitioner erroneously equated the right to receive a part of the land on completing the development of land with the actual transfer of land.