Decided 9 April 2025 (interim order). The Bombay High Court has admitted a challenge by Nirmal Lifestyle Developers to an order levying GST on development rights under a revenue-sharing arrangement, and stayed the order till final hearing. The Court found a prima facie case that there is no supply at all, and that any transfer would be of immovable property outside GST.
Case at a glance
| Case | Nirmal Lifestyle Developers Pvt. Ltd. v. Union of India & Ors. |
| Forum | Bombay High Court (Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla) |
| Case No. | Writ Petition (L) No. 11011 of 2025 |
| Date of order | 9 April 2025 (interim) |
| Impugned order | Order-in-Original No. 35/GST/CGST-NM/ADC/AKS/2024-25 dated 02.01.2025 (DRC-07 dated 14.01.2025) |
| Result | Rule issued; operation of the order stayed |
Facts of the case
The petitioner had entered into a development agreement with L&T Asian Realty Project LLP on a revenue-sharing basis. The department treated the development rights under this arrangement as a supply of service and confirmed a GST demand.
The petitioner sought a declaration that development rights under a revenue-sharing arrangement are not a supply under sections 7 and 9, and that a transfer of land falls outside GST under Schedule III.
Issue before the High Court
Is a revenue-sharing arrangement under a development agreement a taxable supply of service?
What the High Court held
- The petition raises arguable questions, so Rule was issued.
- The issue is similar to the one before the Gujarat High Court, which held that assignment of a lease is a transfer of immovable property and not taxable under Schedule II.
- The petitioner's case is that there is no transfer at all; even if there is one, it is of immovable property and not taxable. A prima facie case for interim relief was made out.
- The department was restrained from acting on the Order-in-Original pending the petition. Replies were to be filed within two weeks.
Practical takeaways for taxpayers
- Developers facing GST demands on revenue-sharing or area-sharing development agreements can seek interim protection where the challenge is on taxability itself.
- This is an interim order; the final decision is awaited.
- Keep the development agreement terms clear on whether any right is transferred and what the consideration is.
Frequently asked questions
Is this a final decision on GST on development agreements?
No. The High Court has only stayed the demand and will decide the issue at final hearing.
Which case did the Court rely on?
It referred to the Gujarat High Court view that assignment of leasehold rights is a transfer of immovable property not taxable under GST.
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This summary is based on the order of the Bombay High Court in Writ Petition (L) No. 11011 of 2025. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.