GST On Lease/Rent Payments: SLP To Be Heard In Supreme Court After Matter Is Decided Before Constitutional Bench Of 9 Judges

Last Updated on April 20, 2023 by Administrator

Issue – The Supreme Court has deferred decision on the constitutionality of GST on lease/rent payments until after the subject now before the Constitution Bench of 9 judges is resolved.

Facts of the case – In a Writ Petition submitted to the Bombay High Court, the petitioner contested the constitutionality of paragraphs 2 and 5(a) of Schedule II to the Central Goods and Services Tax Act of 2017 and the Goa Goods and Services Tax Act of 2017.

The complainant has submitted an SLP to the Supreme Court of India contesting both the Bombay High Court’s ruling and the constitutionality of the GST charge on lease/rent payments.

Arguments – The petitioner argued that only “goods and services” are subject to GST under Article 246A of the Indian Constitution. There isn’t any “service” offered by the landlord towards the tenant in the event of rent arrangement. Therefore, there cannot be a GST duty on the same. According to Entry 49 List II of the Seventh Schedule of the Indian Constitution, only the State Legislatures have the authority to tax transactions involving real estate. As a result, on such a lease/rent deal, GST cannot be assessed under Article 246A.

Reasoning – The Bombay High Court ruled that, insofar as the duty is not included under List II of the Seventh Schedule and since the Service Tax was enacted under the residual authority of legislation, one cannot challenge the presumption of Parliament that there exists a service component to the lease of the land. 

Judgement – The Supreme Court heard requests against High Court rulings and ordered that the service tax cases be included after a ruling by the nine judges who are currently deliberating on the application of Entry 49 List II of the Seventh Schedule of the Constitution of India. 

Provisions used in the case – Article 246A, Entry 49 List II of the Seventh Schedule of the Constitution of India, Central Goods and Services Tax Act, 2017 and the Goa Goods and Services Tax Act, 2017.

Case – Myrayash Hotels Pvt. Ltd. Versus Union Of India & Ors.

Written by – Nikita Shankar