Notification providing for mandatory deeming fiction for deduction towards value of land is ultra-vires the provisions of GST and Constitution

Last updated: 09 May 2022

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The Gujarat High Court has declared a notification mandating a one-third deduction for the value of land in property transactions for GST purposes as invalid. The court found this mandatory deduction to be discriminatory and contrary to the CGST Act and the Constitution. It ruled that such a deduction should only be optional for taxpayers when the actual value of the land cannot be determined.

Court :
Gujarat High Court

Brief :
The Hon'ble Gujarat High Court in Munjaal Manishbhai Bhatt v. Union of India [R/Special Civil Application No. 1350 of 2021 dated May 06,2022] has quashed and set aside the order passed by the AAAR, providing for mandatory deeming fiction for deduction of value of land. Held that, the Notificationproviding for a mandatory fixed rate of deduction of 1/3rd of total consideration towards the value of land is ultra-vires the provisions as well as the scheme of the Central Goods and Services Tax Act, 2017 ("the CGST Act"), and application of such mandatory uniform rate of deduction is discriminatory, arbitrary, and violative of Article 14 of the Constitution of India. Further held that, the deeming fiction of 1/3rd of total consideration towards the value of land will not be mandatory in nature and it will only be available at the option of the taxable person in cases where the actual value of land or undivided share in land is not ascertainable.

Citation :
R/Special Civil Application No. 1350 of 2021 dated May 06,2022

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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