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Time of India
07-05-2025
- Business
- Time of India
Karnataka high court: GST cannot be imposed on solatium paid to landowner
Bengaluru: In a significant relief for landowners, the high court has ruled that solatium — the additional compensation paid for emotional and involuntary loss of land — cannot be taxed under the Goods and Services Tax (GST) regime. Tired of too many ads? go ad free now Justice SR Krishna Kumar delivered the verdict while allowing a batch of petitions filed by Bengaluru residents R Asha and several others, whose land had been acquired by KIADB for the Bengaluru Metro Rail Project . As part of the acquisition process, the landowners were offered a compensation package that included solatium. The petitioners accepted the package. However, the relief soon turned into a dispute when the commercial taxes department slapped them with show-cause notices, demanding GST on the solatium component of the compensation. Despite their responses, the authorities went ahead and confirmed the tax demand. The petitioners argued that the receipt of compensation, including the solatium component for transferring and relinquishing their right over the lands acquired by KIADB for the benefit of BMRCL would amount to transfer/sale of land under the CGST/KGST Act, which exempts the levy of GST. Consequently, the commercial taxes department did not have jurisdiction or authority to demand payment of GST on solatium , they added. However, the govt advocate defended the GST demand. Justice Krishna Kumar noted that the terms and conditions of the agreements in the documents executed between the petitioners and KIADB are merely conditions to a contract and do not reflect an obligation coupled with consideration. "In the instant cases, the agreements entered into between the petitioners and KIADB may contain several conditions, but the same do not amount to an obligation coupled with consideration and payment of solatium to the petitioners cannot be construed or treated as supply of services under Entry 5(e) of Schedule II (of CGST/KGST Act). Tired of too many ads? go ad free now The subject matter of the agreements is not an obligation to do or tolerate an act. Rather it is simply acquisition of lands by the govt and the conditions are incidental to the acquisition of land and to ensure that there is finality to the same," the judge explained while quashing the tax demand notices.
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Business Standard
28-04-2025
- Business
- Business Standard
Karnataka HC stays GST demand of over Rs 50 cr against Mad Over Donuts
Should a donut or any other bakery product sold by 'Mad-over-Donuts' be treated as a restaurant service and charged 5 per cent GST? Or it should be taxed 18 per cent GST by not classifying donut chains as restaurants at all? The Karnataka High Court (HC) will ponder over it and take a call in the next few days as it stayed a Goods and Services Tax (GST) demand of over ₹50 crore against the donut outlet on Friday. Food items sold outside a restaurant setting invite 18 per cent GST, while those served in restaurants are charged 5 per cent GST. Justice SR Krishna Kumar heard the case raising the question whether these products should be classified under restaurant services, attracting a concessional 5 per cent GST rate, or as bakery goods, which might attract a different tax treatment. A copy of the order was uploaded on Monday. Himesh Foods ('Mad Over Donuts'), represented by Advocate Abhishek A Rastogi, told the court that the supply of food products like donuts and cakes constitute a composite supply of services, as defined under the CGST Act. They said that the provision of food at restaurants, eateries, canteens, and messes -- whether consumed on-premises or taken away -- fall under the category of restaurant services, which are taxed at a lower GST rate of 5%. They also referred to a recent interim order of the Bombay High Court, which said that such supplies could be considered services under GST law. The Karnataka High Court said that since there was a prior undertaking by the tax authorities before the Bombay High Court, assuring that no coercive action would be taken while the classification issue was under consideration, the same should be applicable here as well. The court emphasised the importance of judicial consistency and agreed that no precipitative or coercive measures could be pursued by Karnataka's GST authorities during the pendency of the case. The next date of hearing is now on June 6. "… in the light of the undertaking given by the respondents (tax authorities) in relation to the very same petitioner ('Mad Over Donuts') before the Bombay High Court, respondents are directed not to take any precipitative/coercive steps till the next date of hearing,' the order said. Sandeep Sehgal, Partner of tax firm AKM Global, said, 'The company (Mad Over Donuts) pointed out that the Directorate General of GST Intelligence (DGGI) in Mumbai had already issued a consolidated notice covering similar tax issues across multiple states, including Karnataka. Despite this, the Karnataka State GST authorities attempted to raise a separate demand. The court's decision to grant relief to Mad Over Donuts highlights the importance of businesses monitoring overlapping tax actions and taking prompt steps when faced with duplicate proceedings.'
