Court Orders Refund with Interest, Terms GST Deduction on Land Acquisition Illegal
In a significant ruling, the Karnataka High Court, presided over by Justice R. Nataraj, has quashed the deduction of Goods and Services Tax (GST) from the compensation amount awarded for the acquisition of land and structures for the widening of the Mysuru-Madikeri Highway. The court directed the authorities to refund the deducted GST amount of Rs. 12,28,906 along with 15% interest per annum from the date of the award until the payment is made, and also imposed costs of Rs. 50,000 on the respondents.
The case involved petitioners Subbaiah A.P. and others, who challenged the deduction of 18% GST from the compensation awarded for their acquired property measuring 1195 sq.mtrs. in Basavanahalli Village, Kodagu District. The petitioners contended that the acquisition of their property did not constitute a sale of goods or provision of services under the GST law, and therefore, the deduction was without legal authority.
The respondents, including the Deputy Commissioner, Kodagu District, argued that GST was applicable on the valuation of works contracts and structures. However, the court found no legal basis for this argument, emphasizing that the acquisition by the State under its eminent domain powers is neither a sale of goods nor a supply of services.
Justice R. Nataraj highlighted that immovable property, including buildings, cannot be construed as goods under the GST Act, thus exempting such compensation from GST. He referred to a previous judgment by the Madras High Court, which similarly ruled against GST applicability on land acquisition compensation.
In conclusion, the court's decision reinforces the principle that compensation for compulsory land acquisition is not subject to GST, marking a significant victory for landowners contesting such deductions. The ruling mandates the recovery of interest on the deducted GST from the personal assets of the responsible respondent, further holding them accountable for the unlawful deduction.
Bottom Line :
Land acquisition compensation - Deduction of GST from compensation for acquired land and structure is illegal - Acquisition by exercise of eminent domain is neither supply of goods nor supply of services under GST law - Authority directed to refund deducted GST with interest and costs.
Statutory provision(s): Constitution of India, Article 366(12A); Central Goods and Services Tax Act, 2017; Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; Transfer of Property Act, 1882, Section 3.
Subbaiah A.P. v. Deputy Commissioner, Kodagu District, (Karnataka) : Law Finder Doc id # 2989425
