Indirect Tax Updates April 2025

Private Agreements Do Not Override Statutory RCM Liability – Allahabad High Court 

Private Agreements Do Not Override Statutory RCM Liability – Allahabad High Court 

Facts:

• The petitioner (a service recipient) entered into an agreement with the supplier where the supplier agreed to bear all GST liabilities.
• However, GST authorities demanded tax under the Reverse Charge Mechanism (RCM) from the petitioner.

Issue:

• Whether a private agreement between parties can override the statutory liability of the service recipient under RCM provisions.

Held:

• The Court held that obligations under Section 9(3) of the CGST Act are statutory. A private contract cannot override statutory provisions. The service recipient remains liable to pay GST under RCM, irrespective of any private arrangement.

Parallel Proceedings by CGST and SGST Authorities Deemed Impermissible- Madras High Court

Facts:

• Both CGST and SGST authorities initiated separate proceedings against the taxpayer on the same transaction and tax period.
• The taxpayer challenged the duplicity.

Issue:

• Can both CGST and SGST authorities initiate separate proceedings on the same cause of action.

Held:

• The Court held that parallel proceedings are impermissible. Since GST is a unified tax regime (CGST + SGST share a common administration), only one authority should undertake proceedings. Therefore, duplicative notices were quashed.

Misclassification of Imports Leads to Tax Demand- Directorate of Revenue Intelligence (DRI)

Facts:

• Assessee faced a GST demand for allegedly misclassifying telecom equipment imports as exempted parts rather than taxable complete units.
• Assessee argued it followed standard industry practices and was denied a proper hearing.

Issue:

• Whether the classification adopted by Assessee was bona fide and whether the GST department followed due process before raising the massive demand?

Held:

• (Matter pending final decision.), However, interim observations noted that proper adjudication must allow the taxpayer a full opportunity to explain. A direction was given to reconsider the classification based on principles of natural justice.

GST Not Applicable on Assignment of Leasehold Rights – Gujarat High Court 

Facts:

• The taxpayer had long-term lease rights (99 years) on industrial land from a government authority. Later, the taxpayer transferred (assigned) these lease rights to another party for a lump sum amount. The taxpayer paid stamp duty and registration charges for the transfer. The question was whether GST should be charged on this assignment.

Issue:

• Is the transfer (assignment) of leasehold rights in industrial land a “supply” of service under GST, and therefore liable to GST.

Held:

• The Appellate Authority ruled that the assignment of leasehold rights in industrial land is similar to the sale of land.  Sale of land is neither a supply of goods nor services under GST laws, and therefore not taxable under GST. The assignment in this case does not attract GST

Sale of Partly Constructed Mall on “As-Is-Where-Is” Basis – Not Liable to GST

(Karnataka High Court | WP No. 12700 of 2023)

Facts:

• A real estate Company bought a partly constructed shopping mall from a liquidator during insolvency proceedings.
• The sale was done on an “as-is-where-is” basis (i.e., without making it complete or adding services).
• The company paid GST under protest and later applied for a refund, arguing that the transaction was simply a sale of property, not a supply of construction services.

 Issue:

• Whether selling a partly constructed mall without a completion certificate should be treated as:
  • A construction service (and liable to GST), or
  • A sale of building/land (which is not liable to GST)?

Held (High Court’s Decision):

• Nature of Transaction: The sale was not about providing construction services; it was a plain sale of an existing (incomplete) building.
• Entry 5(b) of Schedule II: Only applies where a contract exists to provide construction services and the payment is made before completion.
• Sale under Schedule III: Sale of land and buildings (even partly constructed) is outside GST, covered under Schedule III.
• True Nature Important: Even if the building was incomplete, since there was no agreement to provide construction services, GST cannot be levied.
• Refund Granted: The Court ruled that the tax collected was wrong, and allowed a refund to the petitioner.

Key Takeaways:

• Sale of an incomplete project on “as-is-where-is” basis = Not a supply of services under GST.
• Helps real estate and insolvency sectors avoid unnecessary GST on asset sales.
• GST may apply later if the buyer further develops the property with construction services.

 

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