Deeming Fiction Of Mandatory Deduction Of 1/3rd For Value Of Land Held Ultra Vires – Gujarat High Court

gujarat-high-courtDeeming Fiction Of Mandatory Deduction Of 1/3rd For Value Of Land Held Ultra Vires – Gujarat High Court

The Hon’ble High Court of Gujarat vide its order dated 6th May 2022 in the matter of Munjaal Manishbhai Bhatt Vs Union of India in R/Special Application No.s – 1350, 6840 of 2021 & 5052 of 2022, held that the deeming fiction of mandatory deduction of 1/3rd of value of land while ascertaining the taxable value in view of entry 3(if) of Notification No. – 11/2017 – Central Tax (Rate) and similar notification in the State Tax along with paragraph 2 of both the notifications  is ultra vires, and the same was struck down.

The writ Applicant preferred the Writ application praying for striking down entry 3(if) of Notification 11/2017 – Central Tax (Rate) as well as the similar entry 3(if) in notification No. 11/2017 – State Tax (Rate) along with paragraph No. 2 of both the notifications being ultra-vires and the Section 7(2) of the GST Act read with Entry 5 of Schedule III to GST Act as well as the Section 9 (1) and Section 15 of the GST Act.  Further, the aforesaid entry of the both the notification was prayed to be struck down being manifestly arbitrary, grossly discriminatory and violating Article 14 as well as ultra-vires Article 246A of the Constitution of India.  It was also urged to declare the paragraph 2 of both notifications would be applicable in case wherein undivided share in land is transferred along with constructed flat without separate consideration being fixed towards sale of land as well as GST cannot be imposed on sale and purchase of land.

Facts:

  • The writ applicant is a practising Advocate in this High Court and entered into a contract with Respondent No. 4 i.e., Navratna Organisers and Developers Pvt. Ltd. for the purchase of a plot of land measuring about 1021 square metres located the Unit No. 937, “Kalhar Blues and Greens”, Bopal-Sanand Bypass Road, Ahmedabad as well as for the construction of Bungalow on the said plot by Respondent No. 4.
  • That a separate consideration was agreed upon for the sale of land and construction of Bungalow on the land.
  • That as per the terms of the agreement, the writ-applicant was under a bonafide belief, as the liability of all taxes including GST was on him, that he would be liable to pay GST on construction of Bungalow.
  • That however the respondent No. 4 in view of entry 3(if) of Notification 11/2017 – C.T. (Rate) dated 28.06.2017 and similar entry and notification in State Tax (Rate) read with paragraph 2 of both the notifications, raised an invoice for collection of GST on 1/3rd of the entire consideration received for sale of land and construction of bungalow, and without excluding the consideration for sale of land in computing GST. Hence, the present writ-application.

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