The Gujarat High Court, in a verdict that gave huge relief to property buyers, ruled that the GST should be paid on cost of construction and made it clear that the GST is not applicable to land value. The realistic land value or the undivided share of land of a flat or villa or a commercial property should not be taken into consideration to calculate the GST. It reiterated that the GST is applicable only on the cost of construction. The decision was pronounced by a High Court Bench comprising Justice JB Parthiwala and Justice Nisha M Thakur.
The petitioner, who is a practising advocate, entered into an agreement with Navaratna Oganisers and Developers Pvt Lid to buy a plot and reached an agreement to build a home for home in the plot. The agreement has a clause that GST and all other taxes are borne by the purchaser. The petitioner felt that the GST is payable only on the cost of construction as per the GST Act of 2017. The Navaratna Organisers and Developers said that the client should pay 18% GST on the land value and also on the cost of construction. The petitioner differed with the realtor and developer. The GST is a tax on goods and services and not applicable to land since land cannot be classified as either goods or services. He moved the High Court of Gujarat. The court heard both sides and ruled that the land value does not come under the GST limits.
