The Gujarat High Court has obliterated a part of the GST notice and demanded the deduction of one-third of land’s value towards construction services. The bench has recalled it as an arbitrary measure. The ad hoc deduction of one-third from the land value in the case of construction services has been a source of friction. It has a massive effect on homebuyers in some circumstances.
The Gujarat High Court ruled that a one-third land value deduction from the GST is discretionary. The court added that such value is not required to compute GST on building services to home buyers. The judgement will impact cases where the land value exceeds one-third of the property’s value.
According to the court order, the reduction can be more than one-third, lowering the GST burden on homeowners. As per an author, Abhishek A Rastogi, the subjective nature of deeming reality leads to constitutional provisions and the fundamental right to equality violation.
Construction services in real estate are typically subject to an 18% GST. On the other hand, land receives one-third attrition, bringing the effective rate of taxation to 12%. It’s worth noting that GST applies only when a buyer purchases a house without an occupancy certificate.
