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Case Details: Smt. Asha R vs. Assistant Commissioner of Commercial Taxes - [2025] 173 taxmann.com 863 (Karnataka)

Judiciary and Counsel Details

S.R. Krishna Kumar, J.
V. Raghuraman, Senior Counsel, C. R. Raghavendra, Bhanu Kumar, Raghavendra C. R., Bhanumurthy J.S., Cherian Punnoose, Anil Kumar B., Kum. Krishika Vaishnav, A. Mahesh Chowdhary & Kumari. Krishika Vaishnav, Advs. for the Petitioner.
K. Hema Kumar, AGA for the Respondent.

Facts of the Case

The petitioners, owners of immovable properties, had their land acquired by the state for a metro rail project. As part of the land acquisition process, the petitioners were offered a compensation package, which included a solatium component. This solatium was paid as additional compensation for the land acquisition. Subsequently, the respondents issued show-cause notices to the petitioners, demanding the payment of Goods and Services Tax (GST) on the solatium component of the compensation received.

The petitioners, in response, contested the levy of GST, arguing that the compensation for land acquisition, specifically the solatium component, should not attract GST, as the sale of land—whether as is or after development—falls under the exemption provided in Entry No. 5 of Schedule III of the CGST and Kerala GST (KGST) Acts. The petitioners further referred to Circular No. 177/09/2022-TRU, dated 03-08-2022, which clarified that land transactions are not subject to GST. Despite these arguments, the impugned orders were passed, confirming the GST demand, prompting the petitioners to file the petition challenging the same.

High Court Held

The Hon’ble High Court held that the sale or acquisition of land is constitutionally within the State List and is expressly excluded from GST under Entry No. 5 of Schedule III. It affirmed that there was no legislative intent to tax such transactions and endorsed the clarification issued under Circular No. 177/09/2022-TRU, 03-08-2022. Accordingly, the Court declared that the solatium component received by the petitioners was not exigible to GST.

The impugned show-cause notices and orders were quashed, and the matter was decided in favour of the petitioners.

List of Cases Referred to

Panna Lal Ghosh v. Land Acquisition Collector – (2004) 1 SCC 467 (para 5)
Sunder v. Union of India – (2001) 7 SCC 211 (para 5)
Union of India v. Tarsem Singh – (2019) 9 SCC 304 (para 5)
CST v. Bhayana Builders (P.) Ltd. [2018] 91 taxmann.com 109/66 GST 320/10 GSTL 118 (SC) (para 5)
Munjaal Manishbhai Bhatt v. Union of India [2022] 138 taxmann.com 117/92 GST 327/62 GSTL 262 (Gujarat) (para 5)
GE T & D India Ltd. v. Deputy CCE [2020] 115 taxmann.com 213/35 GSTL 89 (Madras) (para 5)
CST v. Repco Home Finance Ltd. [2020] 117 taxmann.com 755/42 GSTL 104 (Chennai – CESTAT) (para 5)
South Eastern Coalfields Ltd. v. CCE and Service tax [2021] 124 taxmann.com 174/55 GSTL 549 (New Delhi – CESTAT) (para 5)
Paradip Port Trust v. Commissioner of CGST & Excise [2022] 138 taxmann.com 247/62 GSTL 186 (Kolkata – CESTAT) (para 5)
Neyveli Lignite Corporation Ltd. v. Commissioner of Customs, Central Excise & Service Tax, Chennai [2021] 128 taxmann.com 405/53 GSTL 401 (Chennai – CESTAT) (para 5).