Dr. Ajay Kummar Pandey, Advocate Supreme Court of India.
www.4Csupremelawint.com/www.drajaypandey.com The GST department’s recent crackdown on property owners in Noida has sent shockwaves through the real estate sector. Notices demanding crores in GST on the sale of leasehold properties have left homeowners and investors in a state of panic. The authorities claim that the sale of leasehold properties constitutes a "service" rather than a "sale of property," thereby attracting GST. This interpretation has created confusion and raised serious concerns about these notices' arbitrary and time-barred nature.
The Core Issue: Leasehold Property or Service?
Noida’s properties are predominantly leasehold, meaning the land is leased by the Noida Authority to developers or individuals for a specific period, typically 99 years. The GST department argues that transferring such leasehold rights amounts to a "service" under the GST regime, making it taxable. However, this interpretation contradicts the fundamental nature of property transactions, which have traditionally been treated as the sale of immovable property exempt from GST.

The department’s stance has led to exorbitant tax demands, often running into crores, leaving property owners grappling with financial and legal nightmares. To make matters worse, many of these notices are reportedly time-barred, raising questions about the legality and fairness of such actions.

Judicial Precedents: A Ray of Hope
The judiciary has previously addressed similar issues, clarifying the taxation of property transactions. In the landmark case of Commissioner of Central Excise & Customs vs. M/s. Larsen & Toubro Ltd. (2015), the Supreme Court held that the transfer of immovable property cannot be classified as a "service" under the service tax regime. The court emphasized that the sale of land or buildings is excluded from the definition of "service."

Similarly, in Tata Consultancy Services vs. State of Andhra Pradesh (2005), the Supreme Court ruled that transferring immovable property is not a "service" and, therefore, cannot be subjected to service tax. These judgments reinforce the principle that property transactions are distinct from services and should not be taxed under GST.

The Fallout: A Chilling Effect on Real Estate
The GST department’s aggressive stance has created a chilling effect on Noida’s real estate market. Property owners now hesitate to sell their assets, fearing hefty tax liabilities. This has disrupted the market and undermined the confidence of homebuyers and investors.

Moreover, issuing time-barred notices raises serious concerns about the department’s adherence to legal procedures. Under the GST law, tax demands cannot be raised beyond a specific period unless there is evidence of fraud or willful misstatement. The arbitrary nature of these notices has left property owners feeling targeted and helpless.

The Way Forward
The GST authorities must revisit their interpretation of leasehold property transactions and align it with established judicial precedents. The government must clarify this issue to prevent further confusion and litigation.

Property owners, on their part, should seek legal recourse to challenge these notices, relying on the Supreme Court’s judgments to strengthen their case. Collective action by industry bodies and stakeholders can also help bring this issue to the forefront and push for a resolution.

GST department's overreach in Noida.

The GST department’s overreach in Noida’s real estate market is a classic case of legal overreach and administrative high-handedness. By terming property sales as "services," the authorities are not only disregarding judicial precedents but also jeopardizing the growth of the real estate sector. It is time for the government to step in and end this terror, ensuring that property owners are not unfairly burdened with exorbitant tax demands.

As the saying goes, "Justice must not only be done but must also be seen to be done." The GST authorities must uphold this principle and restore faith in the system.

Quote to Remember: "The transfer of immovable property is not a service; it is a sale. Taxing it as a service is not just legally untenable but also morally unjust."

If you or someone you know has received a GST notice on a property sale in Noida, seek legal advice immediately. Share this article to raise awareness and join the fight against arbitrary taxation.