MREAT Clarifies: Homebuyers Cannot Seek GST, Stamp Duty or TDS Refund from Developers in Delayed Projects

In a landmark ruling that brings much-needed clarity to property disputes involving delayed possession, the Maharashtra Real Estate Appellate Tribunal (MREAT) has declared that homebuyers are not entitled to claim refunds of statutory charges such as Goods and Services Tax (GST), stamp duty, Tax Deducted at Source (TDS), or registration fees from real estate developers. The tribunal observed that since these payments are remitted directly to government authorities, builders cannot be held liable for their return.

The decision is expected to have far-reaching implications for both homebuyers seeking remedies under RERA and developers dealing with refund claims in delayed-possession cases across Maharashtra.

Case Background: A Suburban Mumbai Flat Purchase Gone Wrong

The dispute at the centre of this ruling involved a homebuyer who had booked an apartment measuring approximately 1,000 square feet in Mumbai's suburbs during 2017. The buyer reportedly paid over ₹2 crore for the property, with the builder-buyer agreement promising possession by December 2019, subject to a grace period.

However, the project experienced significant delays. According to reports, the development received only a partial Occupation Certificate (OC) in July 2022, well beyond the originally committed timeline. The buyer subsequently decided to exit the project and filed for a complete refund, including the principal amount, all taxes and fees paid, along with applicable interest.

While the state regulatory authority reportedly accepted the refund of the principal amount with interest, the buyer's demand for refund of statutory payments became the contentious issue that reached MREAT for adjudication.

The Tribunal's Verdict: Developers Are Merely Conduits for Government Levies

MREAT delivered a nuanced ruling on the matter, establishing clear distinctions between different categories of payments made by homebuyers. The tribunal held that taxation charges including GST, stamp duty, TDS, registration fees, and similar government levies are essentially paid by buyers on behalf of, and directly to, the government. In this arrangement, developers function merely as intermediaries who collect these amounts and forward them to the concerned authorities.

Since builders neither retain nor derive any financial benefit from these statutory payments, the tribunal ruled that they cannot be compelled to refund such amounts. Homebuyers who wish to recover these levies following booking cancellations or project withdrawals must instead approach the relevant government departments, including tax authorities and stamp duty offices, directly.

This ruling aligns with the broader principle that GST on property transactions in India and other statutory charges flow to government coffers rather than developer accounts.

What Homebuyers Can Still Claim: Principal Amount and Interest

The tribunal reaffirmed that while statutory levies fall outside the scope of developer liability, homebuyers retain the right to receive refunds of the purchase consideration along with applicable interest. These amounts form part of the contractual value and remain refundable under real estate regulations when builders fail to deliver possession within the agreed timeframe.

Industry observers note that this distinction provides clarity to buyer rights and developer obligations under RERA, helping both parties understand the exact scope of refund entitlements in delayed-possession scenarios.

Implications for Stakeholders in Maharashtra's Real Estate Market

For Homebuyers

The ruling means that prospective and existing homebuyers must recognise that cancelling a booking due to project delays or other issues will not automatically result in recovery of statutory payments from the builder. Those seeking refunds of stamp duty and registration charges will need to navigate separate processes with tax and stamp-duty authorities. This underscores the importance of understanding all hidden costs involved in buying a home before committing to a purchase.

For Developers

Real estate developers in Maharashtra now have legal clarity limiting their refund liability to the actual sale consideration and interest. They are relieved from the obligation to return taxes and levies that were collected and remitted to government authorities. This distinction may help developers better manage their financial exposure in dispute resolutions.

Broader Market Impact

The verdict addresses a longstanding grey area in delayed-possession disputes, establishing clear boundaries regarding which costs are refundable and which are not. For those buying under-construction flats in India, this ruling emphasises the need to carefully evaluate project timelines and developer track records before making substantial statutory payments.

Homebuyers are also advised to remain vigilant about hidden builder clauses in property agreements and ensure they thoroughly review all contractual terms before signing.

Disclaimer: This news article is intended for informational purposes only and does not constitute legal or financial advice. Readers are advised to consult qualified legal and tax professionals for guidance specific to their circumstances. The information presented is based on publicly available reports and may be subject to updates or modifications. Ghar.tv does not guarantee the accuracy or completeness of the information provided.