New Delhi, PTI. Experts said the Gujarat High Court has ruled that the actual value of the land should be deducted before levying GST on under-construction flats, which will reduce the tax expense for home buyers. Presently, while levying GST on sale of under-construction flats and units, the tax is calculated on the full value of the flat/unit (including the value of the underlying land). Tax is levied after deducting one-third of the flat price.

Experts say that in urban areas or metros, the actual cost of land is much more than a third of the flat price. The application of one-third deduction is arbitrary in nature as it does not take into account the area, size and location of the land. N. A. Shah’s Associates Partner Naresh Seth said that in the present system, land is taxed indirectly, which is not within the legislative competence of the central government.

He said that this decision of the Gujarat High Court would be fully applicable where the cost of land and construction services has been clearly mentioned in the sale agreement. Naresh Seth says that this is a logical and fair decision and if it is followed then the tax burden on persons buying under construction flats will be reduced significantly.

Significantly, the Gujarat High Court in its judgment in Munjal Manishbhai Bhatt vs. Government of India has included deduction of one-third of the cost of land at the time of purchase of flats. The court said in the judgment that the mandatory deduction of one-third of the cost of the land is not applicable in cases where the value of the land can be clearly ascertained.

Athena Law Associates partner Pawan Arora says that flat buyers who have already suffered additional GST burden due to standard one-third deduction can file a refund claim with the GST authority having jurisdiction over the developer.

At the same time, advocate Avinash Poddar, who is representing the matter in the court, expressed hope that now the government will bring the assessment rules again in this tax system as before.

Edited By: Lakshya Kumar