The Gujarat High Court issued the notice to the Government in a plea challenging provisions regarding the deemed value of land instead of the actual cost.
The writ applicant, Munjaal Manishbhai Bhatt has entered into an agreement with a developer, i.e., the fourth respondent herein with respect to a purchase of plot of land. The said agreement also encompasses construction of a bungalow on the said plot of land by the respondent.
The subject matter of challenge in the present writ application is to the Entry No.3(if) of the Notification No.11/217 -Central Tax (Rate) dated 28th June, 217 read with Para-2 of the said notification.
It has been pointed out that separate consideration was agreed upon between the parties to the agreement, i.e. sale of land and construction of bungalow on the land. The notification is being challenged as the writ applicant is liable to pay tax at the rate of 9% CGST plus 9% SGST under the GST on the entire consideration payable for land as well as construction of bungalow after payment of 1/3rd value towards the land.
It appears that the fourth respondent has raised an invoice on the writ applicant to collect an amount of Rs.42 Lakh towards the tax. The amendment is that because of the impugned notification, the entire consideration towards the sale of land has not been excluded for the purpose of computing the tax liability under the GST Act. In other words, only 1/3rd of the total consideration has been deemed to be the value of the land as per impugned notification.
The petitioner has argued that the impugned entry referred to above in the notification is ultra vires section 7(2) of the GST read with Entry No.5 of the Schedule-III to the GST Act. It is also argued that the deeming fiction introduced under para-2 of the impugned notification is contrary to Section 15 of the GST Act.
The division bench of Justice J.B.Pardiwala and Ilesh J. Vora noted that the writ applicant has been able to make out a strong prima facie case to have an interim order in his favour in terms of para-27(F) of the writ application and permitted the writ applicant to deposit the amount of tax as raised under the invoice without prejudice to his rights and contentions as raised in the writ application.
The court issued the notice to the respondent authority returnable on 10th February 2021.
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