Parallel proceedings and supply under GST refer to two key concepts governing administration and levy of tax under the CGST Act, 2017. Parallel proceedings relate to the restriction on Central and State tax authorities from simultaneously initiating adjudicatory proceedings on the same subject matter, same contravention, and same tax liability once formal proceedings have commenced by one authority, as provided under Section 6(2) of the CGST Act. Supply, on the other hand, is the foundational basis for levy of GST and encompasses all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, or lease made for consideration in the course or furtherance of business, subject to statutory inclusions and exclusions under Section 7 and Schedules II and III, which exclude transactions like transfer of immovable property and activities governed by the principle of mutuality.
Table of Contents
- Parallel Proceedings
- Supply
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1. Parallel Proceedings
Armour Security (India) Ltd. Versus Commissioner CGST, Delhi – Supreme Court
Special Leave Petition (C) No. 6092 of 2025 date 14.08.2025 2025 SCC OnLine SC 1700
Issue – The following issues were for consideration before the Hon’ble Supreme Court:
- Whether issuance of summons can be regarded as “initiation of proceedings” within the meaning of Section 6(2)(b) of the CGST Act?
- Whether “subject matter” within the meaning of Section 6(2)(b) of the CGST Act includes all matters dealt with in summons under the Act?
- What is the purport of an “Order” under Section 6(2)(a) of the CGST Act?
Ruling – The Hon’ble Supreme Court held as follows:
- Clause (b) of sub-section (2) of Section 6 of the CGST Act and the equivalent State enactments bars the “initiation of any proceedings” on the “same subject matter”.
- Any action arising from the audit of accounts or detailed scrutiny of returns must be initiated by the tax administration to which the taxpayer is assigned.
- Intelligence based enforcement action can be initiated by any one of the Central or the State tax administrations despite the taxpayer having been assigned to the other administration.
- Parallel proceedings should not be initiated by other tax administration when one of the tax administrations has already initiated intelligence-based enforcement action.
- All actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute “proceedings” within the meaning of Section 6(2)(b) of the CGST Act.
- The expression “initiation of any proceedings” occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc.
- The expression “subject matter” refers to any tax liability, deficiency, or obligation arising from any particular contravention which the Department seeks to assess or recover.
- Where any two proceedings initiated by the Department seek to assess or recover an identical or a partial overlap in the tax liability, deficiency or obligation arising from any particular contravention, the bar of Section 6(2)(b) would be immediately attracted.
- Where the proceedings concern distinct infractions, the same would not constitute a “same subject matter” even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted.
- The twofold test for determining whether a subject matter is “same” entails, first, determining if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts, and secondly, if the demand or relief sought is identical.
The Hon’ble Supreme Court issued following guidelines to be followed in cases where, after the commencement of an inquiry or investigation by one authority, another inquiry or investigation on the same subject matter is initiated by a different authority.
- Where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response, as the case may be. We say, so because, mere issuance of a summons does not enable either the issuing authority or the recipient to ascertain that proceedings have been initiated.
- Where an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation.
- Upon receipt of such intimation from the assessee, the respective tax authorities shall communicate with each other to verify the veracity of the assessee’s claim. We say, so as this course of action would obviate needless duplication of proceedings and ensure optimal utilisation of the Department’s time, effort, and resources, bearing in mind that action initiated by one authority enures to benefit of all.
- If the claim of the taxable person regarding the overlap of inquiries is found untenable, and the investigations of the two authorities pertain to different “subject matters”, an intimation to this effect, along with the reasons and a specification of the distinct subject matters, shall be immediately conveyed in writing to the taxable person.
- The taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice. Any show cause notice issued in respect of a liability already covered by an existing show cause notice shall be quashed.
- However, if the Central or the State tax authority, as the case may be finds that the matter being inquired into or investigated by it is already the subject of inquiry or investigation by another authority, both authorities shall decide inter se which of them shall continue with the inquiry or investigation. In such a scenario the other authority shall duly forward all material and information relating to its inquiry or investigation into the matter to the authority designated to carry the inquiry or investigation to its logical conclusion. We say, so because, the taxable person except for being afforded the statutory protection from duplication of proceedings, otherwise has no locus to claim which authority should proceed with the inquiry or investigation in a particular matter.
- However, where the authorities are unable to reach a decision as to which of them shall continue with the inquiry or investigation, then in such circumstances, the authority that first initiated the inquiry or investigation shall be empowered to carry it to its logical conclusion, and the courts in such a case would be competent to pass an order for transferring the inquiry or investigation to that authority.
- If it is found that the authorities are not complying with these aforementioned guidelines, it shall be open to the taxable person to file a writ petition before the concerned High Court under Article 226 of the Constitution of India.
- At the same time, taxable persons shall ensure complete cooperation with the authorities. It is incumbent upon them to appear in response to a summons and/or reply to a notice.
2. Supply
2.1 Principle of Mutuality
Indian Medical Association Versus Union of India – Kerala High Court
W.A.NO.1659 of 2024 date 11.04.2025 [2025] 173 taxmann.com 474 (Ker.)
2025 SCC OnLine Ker 2331
In Favour of Assessee
Issue – The petitioner runs various mutual Schemes for the benefit of its member-doctors, e.g. Social Security Schemes or SSS (I, II, and III), Professional Disability Support Scheme (PDSS), Professional Protection Scheme, Kerala Health Scheme, etc. All the Schemes are to support fellow doctors, while one or two Schemes support their immediate family members. The member-doctors contribute an admission/annual fee, and in cases of certain Schemes (e.g. SSS, PDSS) also a fraternity contribution upon the death/disability of a fellow member doctor; the pooled sum is paid out to the widow of deceased doctors, disabled doctors, doctors afflicted with specified diseases, etc.
The question which was placed before the High Court was whether the Association is liable to pay GST on services rendered by it to its members under the aforesaid Schemes? In this background, the Petitioner challenged Constitutional validity of insertion Section 7(1)(aa) and Explanation thereto and its retrospective effect from July 01, 2017.
Ruling – The Hon’ble High Court held as follows:
- The Constitution has not been amended to deem a supply of service by a club or association to its members as a taxable service for the purposes of GST. The decision of the Supreme Court in State of West Bengal v. Calcutta Club Ltd. – [(2019) 19 SCC 107]/[2019] 110 taxmann.com 47 is authority for the proposition that the principle of mutuality has survived under the Constitution even after the 46th Amendment. A phrase as understood under the Constitution cannot be statutorily expanded by any legislature since the power to legislate is itself one that is conferred by the Constitution.
- The concepts of “supply” and “service” having been judicially interpreted as requiring at least two persons – a provider and a recipient, for inferring their existence, and the Supreme Court having held in Calcutta Club that the principle of mutuality has survived the 46th amendment to the Constitution. As the said judgment holds as a binding precedent and the Constitution is not amended suitably to remove the concept of mutuality from the concepts of supply and service thereunder, the impugned amendment to the CGST/SGST Acts necessarily fails the test of constitutionality.
- The provisions of Section 2(17)(e) and Section 7(1)(aa) and the Explanation thereto of the CGST Act, 2017 and the provisions of Section 2(17)(e) and Section 7(1)(aa) and the Explanation thereto of the KGST Act are declared as unconstitutional and void being ultra vires the provisions of Article 246A read with Article 366 (12A) and Article 265 of the Constitution of India.
- Retrospective operation to be illegal. The insertion of a statutory provision that alters the basis of indirect taxation with retrospective effect, so as to tax persons for a prior period when they had not anticipated such a levy and, consequently, had not obtained an opportunity to collect the tax from the recipient of their services, militates against the concept of Rule of Law.
2.2 Compensation Received Towards Acquisition of Land
Smt. Asha R, Versus Assistant Commissioner of Commercial Taxes (Enforcement-17), Bangalore – Karnataka High Court
Writ Petition No. 2552 of 2024 (T-IT) date 10.09.2024 [2025] 173 taxmann.com 863 (Kar.)
In Favour of Assessee
Issue – The petitioners were owners of immovable properties which were acquired by the KIADB for the benefit of the BMRCL for the purpose of construction of Bangalore Metro Rail Project under the provisions contained in Section 28 of the KIAD Act. In pursuance of the same, the BMRCL offered package compensation to the petitioners, who accepted the same and entered into Agreements with the KIADB under Section 29(2) of the KIAD Act and received compensation towards acquisition of the lands. Subsequently, the revenue issued show cause notices calling upon the petitioners to pay GST towards the solatium component of the package compensation received by the petitioners. The petitioners having issued replies to the impugned show cause notices, the respondents passed the orders in original upholding and confirming the demands as per the impugned show cause notices. The issue before the High Court was whether the compensation paid in favour of the petitioners towards acquisition of their lands by the State/KIADB under the head ‘Solatium’ is exigible/amenable to levy of GST under the provisions of CGST/KGST Act, 2017?
Ruling – The Hon’ble High Court held as follows:
- Neither the agreements nor other documents entered into between the petitioners and KIADB indicate that the petitioners have been paid solatium towards compensation received by them from the KIADB. In fact, it is only in the package compensation offered by the BMRCL that it chose to split up the compensation offered to the petitioners under various heads by designating solatium under one head amongst several heads of compensation; merely because the package compensation offered by the BMRCL is split into various heads, the compensation offered by the BMRCL under the designated head “Solatium” cannot be construed or treated or understood as solatium in the real sense of the term/expression “solatium” either under the Land Acquisition Act, 1894 (for short ‘the L.A. Act’), Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (for short ‘the RFCTLARR Act’).
- Though the BMRCL categorised a particular component of the consideration offered by them to the petitioners as solatium, in reality, the transaction essentially entered into between petitioners and KIADB under Section 29 (2) of the KIAD Act was in the nature of a sale/transfer of all rights in land of the petitioners which was directly and squarely exempted from levy of GST under Entry 5 of the Schedule – III of the CGST/KGST Act, since compulsory acquisitions of land where the owners lose their entire right on the property is akin to sale and ought to be treated as such and on this score also, the impugned orders, notices etc., deserve to be quashed.
- The primary/main ground for levying GST on solatium by the respondents is by contending that the act of the petitioners in receiving the solatium component tantamount to agreeing to an obligation to tolerate the act of acquisition within the meaning of Entry 5(e) of the CGST/KGST Act; in this regard, it is relevant to state that the entire compensation including the solatium component having been received by the petitioners pursuant to various documents executed by them in favour of the KIADB would clearly not amount to agreeing to an obligation to tolerate acquisition; in fact, rather than tolerating acquisition of their lands, petitioners have undisputedly executed various documents in favour of KIADB relinquishing/transferring/selling their right over the lands after receiving monetary compensation and neither these transactions nor any act, deed or thing done by the petitioners in this regard would amount to agreeing to the obligation to tolerate an act by the petitioners so as to attract Entry 5(e) of Schedule – II and consequently, on this ground also, the contention of the respondents cannot be accepted.
- The Hon’ble High Court held that the compensation paid in favour of the petitioners towards acquisition of their lands by the State/KIADB under the Head ‘Solatium’ is not exigible/amenable to levy of GST under the provisions of CGST/KGST Act, 2017.
2.3 Assignment of Leasehold Rights of the Plot of Land Allotted by GIDC
Gujarat Chamber of Commerce and Industry Versus Union of India – Gujarat High Court
R/Special Civil Application No. 11345 of 2023 date 03.01.2025
2025 SCC OnLine Guj 537/[2025] 170 taxmann.com 251
In Favour of Assessee
Issue – Whether the assignment or transfer of leasehold rights in plots of land allotted by the Gujarat Industrial Development Corporation (GIDC) for 99 years, along with buildings constructed thereon, by the lessee/assignor to a third party/assignee for a lump-sum consideration constitutes a “supply of services” under the Central/State Goods and Services Tax Act, 2017 (GST Act), thereby attracting GST under Section 9(1).
Ruling – The Hon’ble High Court held as follows:
- Section 7 of the GST Act which provides for the scope of supply of good or services or both for the purpose of the GST Act includes all forms of supply of goods or services or both by any form such as transfer, sale, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Therefore, considering the settled legal position as held by the Hon’ble Supreme Court and other High Courts from time to time, it is true that any lease or letting out of a building including commercial, industrial, residential complex for business either wholly or partly would be “supply of service”. Therefore, reading the provisions of the Act together and harmoniously to understand the nature of levy and the object and purpose of its imposition, no activity of the nature mentioned in the inclusive provision of section 7 of the GST Act can be left out of the net of tax. Simultaneously, the provisions of section 7 have to be read in terms of substantive provision and Schedules which treats the activity as supply of service, particularly, in relation to land and building and includes a lease. The consideration, therefore, as premium/one time premium is a measure on which tax is to be levied, assessed and recovered.
- When the GIDC allots the plot of land on lease of 99 years and charges premium for such allotment followed by periodical lease rent to be paid, is to be considered as supply of service in relation to land and building read with clause 5(a) of Schedule II which specifically provides that renting of immovable property shall be treated as supply of services.
- However, when such leasehold right is transferred by the lessee-assignor in favour of a third person-assignee by execution of deed of assignment, it would be nothing but transfer of an “immovable property” in view of the settled legal position to the effect that lease for 99 years or for a long-term in consideration of premium paid is as much an alienation as sale or mortgage.
- Scope of “supply of services” would not include transfer of leasehold rights as supply of service as it would be transfer of “immovable property” being a benefit arising out of immovable property consisting of land and building.
- Assignment by sale and transfer of leasehold rights of the plot of land allotted by GIDC to the lessee in favour of third party-assignee for a consideration shall be assignment/sale/transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of third party-assignee who would become lessee of GIDC in place of original allottee-lessee. In such circumstances, provisions of section 7(1)(a) of the GST Act providing for scope of supply read with clause 5(b) of Schedule II and Clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and same would not be subject to levy of GST as provided under section 9 of the GST Act.
2.4 Sale of Partially Constructed Building
Rohan Corporation India Pvt. Ltd. Versus Union of India – Karnataka High Court
Writ Petition No. 12700 of 2023 (T-RES) date 10.09.2024/[2025] 173 taxmann.com 480 (Kar.)
In Favour of Assessee
Issue – Lotus Shopping Centres Private Limited was constructing a mall named Lotus Shopping Mall. During the pendency of the construction of the mall, there were insolvency proceedings initiated against the said company. NCLT appointed a liquidator and issued directions to him to liquidate the assets of the company in terms of the provisions contained in the Insolvency and Bankruptcy Code, 2016. The Liquidator invited tenders for sale of the property. On the basis of this invitation, the petitioner submitted the expression of interest and participated in the e-auction and the petitioner emerged to be the successful bidder. Liquidator intimated the payments to be done by the petitioner and also included the payment of GST, to which the petitioner resisted. Petitioner reiterating its stand that no GST was payable on the transaction of sale of land and partly constructed commercial building as the same was neither supply of goods nor supply of service in terms of Schedule III of GST Act. Due to paucity of time to complete the sale transaction, the Petitioner paid GST under protest reserving right to claim refund. Petitioner filed refund of with the GST department. Refund was rejected by holding that Entry 5(b) of Schedule II of the CGST/KGST Act was applicable to the subject transaction which was amenable/exigible to levy of GST and that Entry 5 of Schedule III which grants/provides exemption from levy/payment of GST was not applicable to the subject transaction.
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