Latest GST Case Laws: Supreme Court on ECrL Blocking & AAR Ruling on Redevelopment Deals

1. Supreme Court Rejects Negative Blocking of Electronic Credit Ledger (ECrL) by Department

Case Reference:
DGGI vs. Super Products
Supreme Court Order – June 2025

Facts of the Case:

The Directorate General of GST Intelligence (DGGI) had blocked the Input Tax Credit (ITC) in the taxpayer’s Electronic Credit Ledger (ECrL) with a negative balance under Rule 86A of the CGST Rules, citing alleged fraudulent availment of ITC.

The Delhi High Court struck down this action, stating that negative blocking of the ECrL is not allowed under Rule 86A. It also relied on the earlier decision in Best Crop Science Ltd., which clarified that past fraudulent ITC availment does not justify future negative entries or blocking of credit balances.

DGGI challenged this in the Supreme Court via a Special Leave Petition (SLP).

Supreme Court Ruling

The Hon’ble Supreme Court dismissed the SLP, thereby upholding the Delhi High Court's decision. The ruling confirms that:

• Negative blocking of ECrL is not permitted under Rule 86A of the CGST Rules.
• Only the existing positive balance in the ledger may be blocked if fraud is suspected.
• The department cannot create artificial negative entries to block future credits.

MYGST Refund Comments

This is a major relief for taxpayers and sets a clear precedent. The ruling:

• Reinforces the legal limits of departmental powers under Rule 86A.
• Ensures credit integrity and ledger transparency for businesses.

Prevents misuse of Rule 86A for arbitrary blocking, aiding fair compliance.

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GST Payable on ‘Free’ Flats, Amenities in Redevelopment Projects: AAR Maharashtra

Case Reference:
AAR – M/s. Sharda Vastu Nirmittee Pvt. Ltd.
Ruling by Maharashtra AAR – June 2025

Facts of the Case:

The applicant, a real estate developer, entered into a redevelopment agreement with a housing society. As part of the deal, the developer agreed to provide free flats, additional area, amenities, parking, and even bear stamp duty and registration charges for existing members, in exchange for Transfer of Development Rights (TDR/FSI).

The developer sought clarity on whether GST is applicable to these components and the value to be declared.

AAR Ruling

The Maharashtra Authority for Advance Ruling (AAR) ruled that:

• GST is payable on the “free” supply of flats and amenities to society members.
• These are not truly free, but constitute consideration for development rights.
• This transaction qualifies as barter/exchange under Section 7(1)(a) of the CGST/MGST Act.

Key points from the ruling:

• Supply of residential units in exchange for TDR/FSI is a taxable construction service.
• The developer must pay GST at 1% (affordable housing) or 5% (non-affordable housing) without ITC, for projects commenced on or after April 1, 2019.
• Value of supply = open market value of similar apartments sold to independent buyers, nearest to the date of the development agreement.

The AAR also clarified:

Monetary payments (rent, shifting charges, brokerage, corpus) are not taxable, as they are not services by society members but part of the consideration for development rights.

Impact and MYGST Comments

This ruling confirms that in redevelopment projects:

• Developers must factor in GST on all components provided to members, even if given “free”.
• Proper valuation and tax planning are essential before executing development agreements.
• Developers need to maintain clear records and apply correct tax rates based on housing type.

*This content is for general help only. It may not fit everyone's situation. We’ve tried to make the information clear and correct, but you should still do your own research for your specific case. We are not responsible for any loss caused by using this information.