Gujarat HC Verdict “Reduce GST Cargo to Reduce Burden on Homebuyers”

Seep Gupta
Seep Gupta at March 06, 2023

Gujarat HC Verdict

This is a welcoming move for all aspiring homebuyers. Currently, GST is levied on under-construction flats wherein the entire value of the land is taxed before calculating the GST rate. The entire value of the flat is taxed after giving an ad-hoc reduction of 1/3rd value of the flat irrespective of its value.

According to the experts, the value of land is much higher in urban metropolitan areas than in rural areas. So the 1/3rd value of land is arbitrary in nature as it is uniform in nature and not according to the localities and different places.

The ruling of the Gujarat High Court

According to the Gujarat High Court, the current system of levying GST is quite indirect in nature. The new ruling will apply even where the sale agreement clearly specifies the value of land and also construction services. If this ruling will be implemented properly GST rates on lots of people buying under-construction flats will reduce substantially.

Further, the court also stated that the mandatory deduction of 1/3rd of the value of the land before levying GST uniformly is not sustainable in cases where the value of the land is uncertain or unknown. Also, this strategy can be permitted only in cases where the undivided share is not ascertainable.

According to the partner of Athena Law Associates buyers will proceed to file refunds who have already paid the extra GST because of the standard 1/3rd deduction of the value of the land rule. This judgement will have a great impact on real estate arrangements and other types of development throughout the country. Also, this decision will greatly impact the places where the cost/value and construction cost of land is higher such as in urban metropolitan areas.


Effect of the Decision

This verdict is a mild boost for the real-estate sector because it will reduce the total GST outgo. This decision has come as a boon for the entire real estate sector as it will stop the arbitrary imposition of tax on computed taxable value. It will also bring a sigh of relief for all the taxpayers in the state of Gujarat.


Based on this ruling, other players are also expected to appeal for a similar ruling in the higher courts at the national level. This ruling by the Gujarat High Court will definitely bring smiles to the entire ecosystem.

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