Facts of the Case

In this batch of connected writ petitions, the petitioners had participated in a tender floated by the Raipur Development Authority under the Devendra Nagar (Commercial Complex) Scheme, published on 01.03.2018, for allotment of 14 commercial plots of 750 sq. ft. each on 30-year lease, at an offer price of Rs. 97,50,000 per plot with Rs. 24,38,000 as earnest money. Successful bidders were later informed, through a demand letter, that 18% GST was payable over and above the quoted premium — a condition not mentioned in the tender document or advertisement. When petitioners represented against this, the Authority rejected their representations and directed deposit of 50% of the premium along with GST within three days, failing which the allotment would be cancelled and earnest money forfeited.

Issues Involved

  1. Whether GST is leviable on the premium payable for a long-term (30-year) lease of commercial plots allotted by a state development authority.
  2. Whether the clarificatory letter dated 30.04.2019 (exempting premium on industrial plots/infrastructure development plots) extended to commercial plots as well.

Petitioner's Arguments

  • Levying 18% GST over and above the offer price, when the tender/advertisement was silent on GST, was arbitrary, illegal, and violative of Articles 19(1)(g), 301 and 304 of the Constitution.
  • The clarification dated 30.04.2019 issued by the Revenue Tax Research Unit under "Heading 9972 Real Estate Services" exempted premium payable for long-term lease (30 years or more) of industrial plots or infrastructure-development plots provided by State Government/Industrial Development Corporations, and this exemption should extend to their commercial plots as well.

Respondent's Arguments

  • The issue was no longer res integra, being covered by the Bombay High Court's ruling in Builders Association of Navi Mumbai v. Union of India, which upheld GST demand on lease premium and was affirmed by the Supreme Court in SLP No. 23068/2018 (dismissed 09.11.2022).
  • The 30.04.2019 clarification, being subsequent to the demand notice (12.03.2018) and confined to industrial plots/infrastructure development plots under Notification No. 12/2017, did not cover commercial plots such as those allotted to the petitioners.

Court Order / Findings

  • The Court examined Sections 2(31) and 7 of the CGST Act along with Schedule II, holding that lease, tenancy or licence to occupy land, and letting out of a building including commercial, industrial or residential complexes for business, constitutes a "supply of service" taxable under the Act.
  • The Court held that Notification No. 12/2017 and its clarification dated 30.04.2019 exempted premium only for industrial plots or plots for development of infrastructure for financial business, and did not extend to commercial plots such as those allotted to the petitioners; following Builders Association of Navi Mumbai as affirmed by the Supreme Court, the demand for GST on the lease premium was held to be in accordance with law.
  • All the writ petitions in the batch were accordingly dismissed with no order as to costs.

Important Clarification

The GST exemption on premium for long-term lease of plots granted by government/development authorities under Notification No. 12/2017-Central Tax (Rate) and its clarification dated 30.04.2019 is confined strictly to industrial plots or plots for infrastructure development for financial business; it does not extend to commercial plots, on which GST at the applicable rate remains payable on the premium as consideration for a taxable "supply of service" under Section 7 read with Schedule II of the CGST Act.

Sections Involved

  • Section 7, CGST Act, 2017 — defines "supply," including lease, licence and rental of property for consideration.
  • Section 2(31), CGST Act, 2017 — defines "consideration."
  • Schedule II, CGST Act, 2017 — clarifies that lease/letting out of land or building, including commercial complexes, is a supply of service.
  • Notification No. 12/2017-Central Tax (Rate) — exempts premium on long-term lease of industrial plots/infrastructure-development plots from GST.

Decision – In Favour of

In favour of the Department — all connected writ petitions challenging the levy of GST on the commercial plot lease premium were dismissed.

Case Details

  • Court: High Court of Chhattisgarh, Bilaspur
  • Case Number: WPC No. 1272 of 2018 & WPT No. 42 of 2019
  • CNR / Citation: WPC No. 1272 of 2018 & WPT No. 42 of 2019 (with connected matters)
  • Coram: Hon'ble Shri Justice Rakesh Mohan Pandey
  • Date of Order: 26 July 2023

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