Plea filed in Supreme Court challenging Constitutional validity of GST on rental payments

The Supreme Court recently sought the response of the Central government in a plea challenging the constitutional validity of levying Goods and Services Tax (GST) on rental payments [Myrayash Hotels Pvt. Ltd. v. Union of India and ors.]..A Bench of Justices MR Shah and BV Nagarathna directed Additional Solicitor General N Venkataraman to file a counter affidavit in the matter..The Special Leave Petition (SLP) before the top court has challenged a judgment of the Bombay High Court in which it was held that the GST can be levied on income derived from lease of land. The petition before the Bombay High Court had challenged the constitutional validity of Para 2 of Schedule II to the Central Goods and Services Tax Act, 2017 and the Goa Goods and Services Tax Act, 2017Relying on earlier judgments relating to the case of leviability of “service tax” under Chapter V of the Finance Act, 1994 on lease/rent payments, the Bomaby High Court had dismissed the petition which prompted the present appeal before the top court. .The petitioner in appeal contended that the levy of GST on rent agreements is completely unconstitutional and that the petitioner ought not to be made liable for such payments.The appeal pointed out that the Supreme Court, in India Cement Ltd. v State of TN, Goodricke Group Ltd. v State of WB, State of WB v Kesoram Industries, concluded that tax on land can include even a tax on the user of the land."By deeming lease of land to be a "supply of service" and then taxing it, essentially the GST Act taxes the land itself. There is no reason why income or yield of land should be allowed to be taxed under Entry 49 List II, but the use of the land which produces that yield or income should fall outside Entry 49 List II. When GST is levied on lease of land, it is ultimately levied on the lease income which is yield of land itself. The lease income and the lease user are inextricably linked. One cannot say that the lease is separate from the lease income which is generated," the plea stated. .The petitioner urged the Supreme Court to consider the following questions of law:Whether a tax on lease of land is the pith and substance covered by Entry 49 List II of the Constitution of India;Whether a lease of land is a "Service" as contemplated by Article 246A read with Articles 366(12A) and 26(A) of the Constitution of India;Whether the levy of GST on lease of land under Para 2 of Schedule II of the Central Goods and Services Tax Act, 2017 and Goa Goods and Services Tax Act, 2017 is ultra vires of the Constitution of India; andWhether the impugned order of the Bombay High Court is sustainable in law..Senior Advocate Kavin Gulati with Advocates Avi Tandon, Ishaan Patkar and Advocate-on-Record Arnav Narain appeared for the petitoners..The matter will be considered next on May 4. .[Read Order]

Plea filed in Supreme Court challenging Constitutional validity of GST on rental payments

Chaitanya Singh

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