Interim relief granted on GST demand over development agreement revenue share, treating alleged immovable property transfer outside scope

HC considered a petition challenging GST liability on a revenue-sharing arrangement under a development agreement between petitioner and a realty LLP. Petitioner contended there was no transfer, and even if any transfer existed, it was of immovable property, outside GST's scope. HC accepted that a prima facie case for interim relief was made out and effectively stayed the demand, directing respondent authorities to file an affidavit in reply within two weeks and serve it on petitioner's advocate. The petition was accordingly disposed of.

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In the Bombay High Court case, the petitioner sought a declaration that development rights under a revenue-sharing arrangement do not constitute a "supply" of services subject to GST under the CGST Act. The petitioner argued that these rights should be considered a "sale of land," which falls outside the GST taxation scheme per Articles 246 and 246A of the Constitution and relevant sections of the CGST Act. The petitioner also sought to quash an Order-in-Original dated January 2, 2025.The court considered whether the revenue-sharing arrangement with L & T Asian Realty Project LLP constituted a supply of service exigible to GST. The court noted that while the issue is similar to a case before the Gujarat High Court-where the assignment of a lease was deemed a transfer of immovable property and not taxable under GST-the current case involves no transfer, or if any, a transfer of immovable property, thus not taxable under GST. Consequently, the court found a prima facie case for interim relief.The court granted interim relief, restraining the respondents from acting on the contested Order-in-Original pending the petition's final resolution. Respondents were directed to file an Affidavit in Reply within two weeks, with the petitioner allowed to file a Rejoinder thereafter. The order will be digitally signed and can be acted upon via fax or email.

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