M/S. Sakti Builders vs. The State Of Karnataka

Facts

The petitioners, M/s. Sakti Builders and M/s. Mangala Enterprises, have filed a writ petition challenging a demand notice dated May 2, 2019, issued by the Joint Director of Town Planning (North), Bruhat Bengaluru Mahanagara Palike (BBMP). The notice demands the deposit of ground rent along with 18% Goods and Services Tax (GST) amounting to Rs. 83,71,282/-. The petitioners are seeking to quash this demand notice specifically concerning the GST component. The present writ petition raises identical issues to those previously considered in W.P. No. 4601/2020 and connected cases, which were disposed of by this Court on August 4, 2021.

Held

The Court disposed of the writ petition by following its previous order dated August 4, 2021, passed in W.P. No. 4601/2020 and connected cases. Although the specific reasoning from the earlier order is not reproduced here, the implication is that the Court found the demand for GST on ground rent to be unsustainable. The ratio decidendi would likely be that ground rent, being a statutory charge for the use of land and not a 'supply' as defined under the CGST Act, is not exigible to GST. The operative direction would be to quash the demand notice to the extent it levies GST on the ground rent. The amount of ground rent itself, if legally due, would likely remain payable. No issue was expressly left undecided.

Key Issues

1. Whether the demand for Goods and Services Tax (GST) on the ground rent is legally sustainable, considering the nature of the transaction and the relevant provisions of the GST law? The petitioners argued that the demand for GST on ground rent is impermissible. They contended that ground rent is a statutory charge or fee levied by the local authority for the use of land and does not constitute a supply of goods or services as defined under the GST regime. Therefore, it should not be subject to GST. They relied on the principle that statutory levies, unless specifically brought within the ambit of GST, are not taxable. The respondents (State of Karnataka and BBMP authorities) argued that the ground rent, when collected by the local body, is in the nature of a consideration for the right to use the land, which could be construed as a service. They likely contended that the demand is in accordance with the prevailing tax laws and that the petitioners are liable to pay GST on such charges. The specific provisions or circulars relied upon by the respondents are not detailed in the judgment.