The Karnataka High Court has stated that the Goods and Services Tax (GST) should not be applied to fees collected for approving building plans. According to the court, this approval process does not involve selling any goods or providing any services.
On 21 July, Justice R. Nataraj partly permitted a petition of Sai Sravanthi Infra Projects Pvt. Ltd. and others against the Bangalore Development Authority (BDA) and other authorities, holding that the authorities do not have statutory authority to levy several charges while sanctioning the petitioners’ development plan. He stated:
“The respondent No.3 is not entitled to collect CGST and SGST as there is no supply of goods or provision of services in sanctioning the building plan.”
The applicants asked for approval for a development plan for construction on their properties in Bengaluru. A demand of Rs 4.43 crore had been raised by the authorities concerning scrutiny fee, ground rent, development fee, plan paper fee, CGST, SGST, labour welfare cess and security deposit.
The petitioners disputed the demand, arguing that the authorities lacked a statutory basis for imposing several charges. They claimed that GST could not be imposed on charges concerning the sanction of the building plan since the procedure did not comprise any supply of goods or services.
The Court placed reliance on its earlier decision in Mr Sunderam Shetty v. State of Karnataka, which stated that charges including ground rent, licence fee, scrutiny fee and security deposit could not be levied without statutory authority. It stated:
“There are no provisions under the Bangalore Development Authority Act, 1976 that authorize it to collect ground rent, scrutiny fee, security deposit etc., The authority has imposed these charges, apparently in view of the BBMP imposing such charges…”
The court ruled that the labour welfare cess cannot be demanded before construction begins. It instructed the authorities to collect the cess according to Rule 4 of the Building and Other Construction Workers’ Welfare Cess Rules, 1998.
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Therefore, the HC set aside the demand for scrutiny fee, ground rent and security deposit. It instructed the authority to raise a fresh demand for labour cess as per the specified process and to sanction the building plan within 1 month. It mentioned that the directions are as per the consequence of a pending appeal against the earlier decision relied upon by the Court.
| Case Title | Sai Sravanthi Infra Projects Pvt. Ltd. V/S The State of Karnataka |
| Date | 30.09.2022 |
| Counsel For Petitioner | Sammith S., Advocate |
| Counsel For Respondent | Aditya Diwakar, Additional Government Advocate for R1 and R2, Deepti Ayathan, Advocate for R3 and R5, and Aravind M. Neglur, Advocate for R 4 |
| Karnataka High Court | Read Order |
