A redevelopment with multiple landowners raises a threshold question that precedes the rate analysis: who is the supplier of the development rights, and is each landowner a separate supplier? Where the land is jointly owned by multiple individuals and their shares are ascertainable, each co-owner is treated as a distinct supplier under GST law, and each co-owner must obtain GST registration individually if that co-owner’s share of the consideration exceeds the threshold. The multiple-owner characterisation is the first variable; the second is the characterisation of the development-rights transfer itself.
The Multiple-Owner Distinct-Supplier Principle
Where land is jointly owned by multiple individuals, each co-owner’s share is a separate supply to the extent of that share. The developer’s obligation to each landowner is separate, and the consideration attributable to each landowner should be identified. A single development agreement signed by all co-owners does not convert them into a single supplier; the shares and the consideration should be documented separately.
The practical consequence is that the threshold applies per co-owner, not to the aggregate consideration for the land. A co-owner whose share is below ₹20 lakh may not be required to register, while a co-owner whose share exceeds the threshold is required to register. The agreement and the payment schedule should reflect the separate shares.
The Development-Rights Controversy
The taxability of the transfer of development rights under a joint development agreement has been the subject of significant litigation. The GST authorities have sought to tax landowners on the transfer of development rights, characterising the arrangement as a barter in which the landowner supplies development rights and receives construction services. The Bombay High Court has given relief to landowners in specific cases, holding that no GST can be levied on redevelopment where the landowner has not sold the development rights, and that development rights which are part of the land cannot be artificially severed and taxed as services.
The Bombay High Court’s Goa bench has further ruled that GST is not applicable on construction services under a JDA once the developer becomes the owner of the property through conveyance. The rulings are fact-specific, and the department has not uniformly accepted the position. The landowner and the developer should analyse the specific structure—whether development rights are sold, whether a conveyance has occurred, and whether the arrangement is a revenue-sharing or area-sharing model—before adopting a position.
Leg-Separation: Development Rights, Construction and Corpus
A redevelopment transaction has multiple legs: the transfer or grant of development rights; the construction of the new building; the corpus payment; the transit rent; and any additional area. Each leg has a different GST character, and the documentation should separate them. The construction leg is a supply by the developer and is governed by the real-estate rate notifications. The corpus payment and transit rent are analysed on their own character. The development-rights leg is the controversial leg, and the Bombay High Court rulings provide the framework for the landowner’s position.
A lump-sum agreement that does not allocate consideration across the legs creates valuation and classification risk. The agreement should identify the development-rights consideration, the construction obligation, the corpus and the transit rent separately.
Documentation and Risk Management
The multiple landowners should maintain the ownership deed, the share arrangement, the development agreement, the separate consideration schedules, the conveyance deed and the GST returns. Where the landowners adopt the Bombay High Court position that the development-rights transfer is not taxable, they should document the basis and be prepared to defend it. Where they adopt a taxable position, they should apply GST consistently across the co-owners.
What the Landowners and Developer Should Control
The redevelopment outcome depends on three variables: whether each co-owner is treated as a distinct supplier with a separate threshold; whether the development-rights transfer is characterised as a taxable supply or as part of the land; and whether the agreement separates the development-rights, construction and corpus legs. The parties that control these variables are better placed than those that treat the multiple-owner redevelopment as a single undifferentiated transaction.
Call to Action: We advise landowners, developers and societies on multiple-owner redevelopment, JDA taxability, the Bombay High Court rulings and leg-separation documentation. For a transaction-specific review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.