Landmark judgment establishes that GST cannot be levied on compensation for land acquired by the state, directing a refund with interest.
In a significant ruling, the Karnataka High Court has directed the refund of Goods and Services Tax (GST) deducted from compensation awarded for land acquisition, declaring such deductions illegal. The judgment, delivered by Justice R. Nataraj, came in response to a writ petition filed by Smt. P.S. Shamala against the Deputy Commissioner of Kodagu District and others. The court found that the acquisition of land by the state does not constitute a "supply of goods or services" under the GST Act, 2017, and thus, the deduction of GST from the compensation awarded to Shamala was unlawful.
The case centered around the acquisition of Shamala's land for the widening of the Mysuru-Madikeri Highway, for which she was awarded a compensation of Rs.1,21,33,938. However, a sum of ?18,39,252 was deducted as GST by the authorities, prompting Shamala to challenge the deduction. The court ruled that the acquisition of land by the state, under its power of eminent domain, does not involve any sale of goods or provision of services, thus falling outside the ambit of GST.
The court's decision emphasized that immovable property, such as land and structures, cannot be considered as goods, and therefore, do not attract GST. Justice Nataraj referenced a similar decision by the Madras High Court, which also held that GST is not applicable to compensation amounts for land acquisition. The Karnataka High Court ordered the respondents to refund the deducted GST amount along with 15% interest per annum from the date of the award until payment. Additionally, the court directed the respondent to pay costs of Rs. 50,000 to Shamala for the unnecessary litigation she was forced to undertake.
This judgment reinforces the legal interpretation that compensation for land acquisition does not attract GST unless explicitly stated in the GST Act, providing clarity and relief to affected landowners.
Bottom line:-
Deduction of GST from compensation paid for land acquisition is illegal, as acquisition of property by the State does not constitute "supply of goods or service" under the GST Act.
Statutory provision(s): Goods and Services Tax Act, 2017, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, Income Tax Act, 1961, Transfer of Property Act, 1881.
Smt. P.S. Shamala v. Deputy Commissioner, Kodagu District, (Karnataka) : Law Finder Doc id # 2948551
