Development rights under GST are treated as taxable services, not sale of land, with valuation governed by prescribed notifications.

Transfer of development rights is treated as a supply of service under GST where the landowner retains title and only development rights are granted; it is not regarded as a sale of land and therefore does not fall within the land exemption in Schedule III. The note also states that tax liability on such rights arises when the developer transfers possession or the right in the constructed complex to the person supplying the development rights. Valuation is to be determined under the specified GST notifications, including the rate and valuation framework referred to for Heading 9954.

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Issues: (i) Whether grant of development rights for the developable land is liable to GST. (ii) If liable, what is the proper valuation and timing mechanism for levy of GST.

Issue (i): Whether grant of development rights for the developable land is liable to GST.

Analysis: The arrangement did not amount to sale of land or transfer of title in land. The landowner retained ownership, while the applicant received only development rights and related permissions to develop, market and deal with the project. Since the transaction was not covered by the exclusion for sale of land under Schedule III, and the statutory scheme treated taxable supplies of services broadly under section 7 read with Schedule II, the grant of development rights constituted a taxable supply. The notifications governing development rights also proceeded on the basis that such supplies were taxable.

Conclusion: Yes. The grant of development rights is liable to GST and is taxable.

Issue (ii): If liable, what is the proper valuation and timing mechanism for levy of GST.

Analysis: The applicable timing rule and special procedure were held to be governed by the notified mechanism for supplies involving development rights and construction services. Valuation was to be determined in accordance with the rate and valuation notifications referred to in the order, particularly the relevant entry for construction services read with the prescribed notification framework.

Conclusion: The valuation and timing of tax are to be determined in accordance with the notified procedure contained in the order, including the relevant valuation notification.

Final Conclusion: The application was decided against the applicant on the principal question, and the Authority affirmed that transfer of development rights is taxable under GST with valuation to follow the notified mechanism.

Ratio Decidendi: A transfer of development rights, where ownership in land is retained by the landowner and only development-related rights are conferred, is not sale of land under Schedule III and is a taxable supply under the GST framework.

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