The Rajasthan High Court, last day admitted a petition seeking exemption to supply of construction services to affordable houses constructed under the Government approved Housing projects.
The petitioners, Reverence Infrastructure (India) LLP, has approached the High Court impugning notifications issued under the CGST, and SGST whereby 9% percent tax was made applicable to two-third of the value of the intra-state services involving construction of complex building or civil structure and 18% was imposed on % on two-third of the value of inter-state services of construction of building or sale of its units thereof.
The petitioners contended that the impugned notifications imposes tax on entire construction services without excluding from its ambit the construction services under Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana or housing scheme of a State Government and further the exemption notification from CGST issued in exercise of powers under Section 11 (1) of the CGST Act also doesn’t provide for any exemption from levy of tax in this regard. They claim that earlier, under the service tax regime, the said services were exempted from the levy of tax.
According to them, the impugned notifications are ultra-vires to the provisions of Act and also violative of doctrine of promissory estoppel.
The petitioners submitted that have set up their projects at a huge investment of approximately Rs. 6.24Cr by borrowing funds and availing of finance facilities through Banks and Financial Institutions. They are yet to recover the cost of setting up the projects and if at this stage the Respondents burden the Petitioner with unaccounted / unreasonable CGST, SGST and IGST, it would not be economic viable for Petitioner to continue its Business.
“As a result thereof under the Impugned Notifications, Petitioner has been made liable to pay CGST (9%) along with SGST (9%) on two-third value of intra-state supply of Specified Services which isunjust, arbitrary and unreasonable. Moreover, Petitioner is also liable to pay 18% IGST on two-third value of the supply of specified services in the event of inter-state supply of services which is also arbitrary in nature. Such notifications are thus arbitrary being contrary to the assurance provided for exemption of tax by Respondent No. 1 under the Notification dated 20th June, 2012.,” the petition reads.
They further contended that in the budget speech of the financial year 2016 – 2017, the then Finance Minister Mr. Arun Jaitely proposed for exemption of Service Tax on construction of affordable houses upto 60 square metre.
“The purported implementation of the Impugned Notifications will increase the financial burden on the Petitioner and will adversely impact the already meagre margins of the Petitioner in the project.”
Advocate Sanjay Jhanwar appeared on behalf of the petitioners.
Read the full text of the Petition below.
