Transferable Development Rights (TDRS) - A New Misery For Builders

The Maharashtra Sales Tax Tribunal (MSTT/Tribunal), vide its land mark judgment dated 3 May 2016, in the matter of M/s Sumer Corporation v The State of Maharashtra,¹ has decided the issue of taxability of Transferable Development Rights (TDR) and Development Right Certificates (DRC) that are acquired from Slum Rehabilitation Authority (SRA) and subsequently transferred. The Tribunal held that such transfer would be taxable under the provisions of Maharashtra Value Added Tax Act, 2002 (MVAT Act). The Tribunal analysed clauses of the contract along with provisions of the MVAT Act and legal precedents to conclude that acquisition of TDRs was taxable under the provisions of the MVAT Act as the same was acquired as consideration not only for land but also for undertaking construction activities. In the absence of contract value, the Tribunal directed the authorities to follow the mechanism prescribed under Rule 58 of MVAT Rules to compute the consideration attributable to