A bench of the Gujarat High Court has quashed the tax liability notices issued via the GST department that ask for recovering the tax on the GIDC plots transferred to third parties from their original allottees.
The court ruled that GST does not apply to these transactions and rejected the government’s appeal to stay the order for approaching the Apex Court
GST Notices Given to 500 Enterprises
As per the sources it cites that the GST dept has furnished the notices to 500 industries for Rs 5500 Crore recovery along with the original amount and interest as well as penalty. The government protested the petition, asserting it shall make a loss of Rs 8000 crore in GST revenue. The government now is preparing to submit a plea to the Apex court.
The high court in the previous year has furnished the notices before the Union government, Chief Commissioner of Central Tax, and Special Commissioner of State Tax, among others, in reply to a petition filed by the Gujarat Chamber of Commerce and Industry (GCCI) and four industries against the notices issued to them by the GST department.
The major problem was that if the GST levy from industries that have allotted their leasehold rights of GIDC allotted the plots to third parties. The department has regarded the transaction between them as a service obligated to GST and furnished the notices for the service tax quantification to the original allotted.
Effect on Allocated
Beyond GCCI four industries have contested the notices via department. There are 400 such allottees in various GIDC areas in the state that encounter hefty service tax bills if the department moves with the notice.
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GCCI raised the problem to the court that its members had been allotted plots by the Gujarat Industrial Development Corporation (GIDC) in distinct regions in the state on a lease basis. Under the GST, the first transaction was waived from the law and the transferor (GIDC) is not obligated to file any tax. However many allottees transferred their lease rights to third parties post getting GIDC permission in 2017.
Late Action By the GST Department
The GST department came to know about this type of transaction and after 7 years, they started issuing notices to provide the transaction documents to quantify the tax.
Also, GCCI furnished to the court that the GST department has laid on a recent ruling furnished via the Bombay HC that regarded these transactions as GST leviable. Therefore they asked for the information to impose the service tax which the GCCI claimed was not legitimate. They asked the HC to quash the notices as not being statutory under GST law.
