Decided 8 April 2025. The Nagpur Bench of the Bombay High Court has quashed a GST demand raised under Entry 5B of the reverse charge notification on a development agreement. It held that 'transfer of development rights or FSI' in Entry 5B refers to Transferable Development Rights (TDR) under the development control regulations, not to the rights a developer obtains from a landowner to build on the land.
Case at a glance
| Case | M/s Shrinivasa Realcon Pvt. Ltd. v. Deputy Commissioner, Anti-Evasion, CGST Nagpur & Ors. |
| Forum | Bombay High Court, Nagpur Bench (Justice Avinash G. Gharote and Justice Abhay J. Mantri) |
| Case No. | Writ Petition No. 7135 of 2024 |
| Date of order | 8 April 2025 |
| Key provision | Entry 5B, Notification No. 13/2017-Central Tax (Rate) as amended on 29.03.2019 |
| Result | SCN and order quashed |
Facts of the case
The petitioner was appointed developer by a landowner to build a multi-storey complex on an 8,000 sq ft plot at Mouza Lendra, for consideration of ₹7 crore and two apartments.
The department issued notices demanding GST on the transaction under Entry 5B (RCM on transfer of development rights or FSI to a promoter) and confirmed the demand by order dated 10.12.2024.
Issue before the High Court
Does a development agreement under which a developer gets the right to build on the owner's land amount to 'transfer of development rights or FSI' under Entry 5B?
What the High Court held
- Read together with 'FSI', the expression 'transfer of development rights' in Entry 5B means TDR as defined in Regulation 11.2 of the Maharashtra Unified Development Control and Promotion Regulations: compensation in the form of FSI or development rights.
- The rights a developer derives from an owner under a development agreement, in return for which units are shared or sold, are not TDR or FSI under Entry 5B.
- No TDR or FSI was purchased from anyone. Clause 18 of the agreement, relating to a deed of declaration under the Maharashtra Apartment Ownership Act, did not change this.
- The show cause notice and the order were quashed.
Practical takeaways for taxpayers
- Developers who received Entry 5B notices on plain joint development agreements, without any purchase of TDR, have a strong ground to contest them.
- Check whether any TDR certificate or additional FSI was actually bought; Entry 5B is aimed at those transactions.
- Keep the development agreement and municipal FSI records ready to show the nature of rights.
Frequently asked questions
What is Entry 5B of the RCM notification?
It places GST under reverse charge on the promoter for services by way of transfer of development rights or FSI for construction of a project.
Does Entry 5B apply to every joint development agreement?
According to this ruling, no. It applies to transfer of TDR/FSI as defined in development control regulations, not to a developer's right to build under an agreement with the owner.
Facing a similar GST dispute?
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This summary is based on the order of the Bombay High Court, Nagpur Bench, in Writ Petition No. 7135 of 2024. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.