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CREDAI-MCHI hosted a seminar earlier this week at its Mumbai office to shed light on the implications of the recent Bombay High Court ruling concerning GST relief for homeowners in redevelopment projects. The panel featured industry experts, including Mr. Sunny Bijlani, Joint Secretary of CREDAI-MCHI, Mr. Rohit Jain, Deputy Managing Partner at Economic Laws Practice (ELP), and Mr. Harsh Shah, Partner at ELP. The court ruled that GST is not applicable where developers are appointed for redevelopment without the sale or transfer of development rights (TDR) or Floor Space Index (FSI). The judgement quashed a tax demand under Entry 5B of the relevant GST notification, emphasising that redevelopment agreements limited to construction do not involve the transfer of TDR or FSI under Maharashtra's Unified DCPR.
The Bombay High Court's recent decision in the case of M/s Shrinivasa Realcon Pvt. Ltd. vs. Deputy Commissioner, Anti-Evasion Branch was the subject of a knowledge seminar that CREDAI-MCHI held last week at its Mumbai office. The ruling granted significant GST relief to homeowners involved in redevelopment projects by clarifying that GST is not applicable in cases where developers are appointed solely for redevelopment work, provided there is no sale or transfer of development rights (TDR) or Floor Space Index (FSI). Advertisement
The seminar featured insights from key industry players, including Mr. Sunny Bijlani, Joint Secretary of CREDAI-MCHI, who underscored the urgent need to address redevelopment challenges in Mumbai. He noted that exorbitant approval costs in Mumbai-standing at INR 55,200 per square metre compared to INR 1,800 in Pune and INR 5,500 in Delhi-are hindering redevelopment projects. He emphasised that alongside GST relief, a reassessment of these costs could significantly accelerate redevelopment, providing safer housing for residents in dilapidated structures and unlocking urban housing supply.
Adding to the discussion, Mr. Harsh Shah, Partner at ELP, stated that confusion around the GST treatment of development rights has led to a spate of litigations across multiple High Courts, including those in Bombay, Delhi, Gujarat, and Karnataka. He clarified that the recent Bombay High Court ruling does not constitute a blanket GST exemption for redevelopment projects. Instead, it stated that GST on development rights is not payable under the reverse charge mechanism, but did not abolish the tax altogether. Shah highlighted the urgent need for a consistent interpretation of GST law to mitigate legal and financial uncertainties for developers.
Meanwhile, Mr. Rohit Jain, Deputy Managing Partner at ELP, pointed out that the current GST structure poses significant financial challenges for developers. He explained that developers are subject to multiple layers of GST-5% on sales to customers, 18% on TDR, and 5% on units handed back to existing residents-along with non-creditable GST on construction materials. Jain noted that despite recent High Court rulings, GST continues to apply under either forward or reverse charge mechanisms, and misinterpretation of these rulings could lead to further complications.
CREDAI-MCHI disclosed that over 25,000 buildings in the Mumbai Metropolitan Region (MMR) are eligible for redevelopment, with an estimated project value exceeding INR 30,000 crore. The Maharashtra Housing and Area Development Authority (MHADA) has already commenced structural audits for nearly 13,000 cessed buildings in South Mumbai, signalling an urgent need for redevelopment initiatives.
Looking ahead, CREDAI-MCHI reiterated its commitment to facilitating smoother redevelopment processes and supporting housing societies through clearer legal frameworks. The organisation also announced plans to host the second edition of the EODR Exhibition, aimed at showcasing best practices and addressing key challenges in redevelopment projects.
As redevelopment continues to be a crucial element of Mumbai's urban growth, stakeholders are urging for clearer guidelines from the GST Council and the judiciary to mitigate legal risks and foster project viability. CREDAI-MCHI's upcoming initiatives, including the EODR Exhibition, reflect the organisation's ongoing efforts to address these challenges and support the redevelopment sector in the Mumbai Metropolitan Region.
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