The Allahabad High Court has quashed a letter issued by Yamuna Expressway Industrial Development Authority (YEIDA), which required M/s Ram Kamal Healthcare Pvt. Ltd. (petitioner) to pay GST on the upfront fee for an institutional plot allotment.

While quashing the letter, the High Court held that the exemption under Section 11 of the Central Goods and Services Tax Act, 2017 (CGST Act) was unconditional, and YEIDA had no basis to demand GST from the hospital.

The Division Bench of Justice Saumitra Dayal Singh and Justice Vinod Diwakar observed that “the Authority for Advance Ruling has answered the query of the YEIDA in unequivocal terms. It has specifically held that the premium amount described as upfront amount charged by the YEIDA was exempt from tax under serial no. 41 of Notification No. 12/2017, dated 28.06.2017 as amended by Notification No. 32/2017, dated 13.10.2017. Therefore, as to tax of exemption of the transaction in question, there could never arise any doubt as to its basic applicability”.

“The only rider that was added by the Authority for Advance Ruling was that such exemption would be available subject to conditions as mentioned at serial no. 41 of the above-described Notifications”, added the Bench.

Advocate Nishant Mishra appeared for the Petitioner, whereas ASGI Aditya Bhushan Singhal appeared for the Respondent.

As per the brief facts, the present petition had been filed seeking to quash the letter/communication dated Aug 24, 2018, issued behalf of YEIDA, which demanded that the petitioner deposit a GST of 18% on the premium of Rs. 3.80 crores, charged by the YEIDA against an institutional plot, allotted to the petitioner.

After considering the submission, the Bench took note of the specific query raised by YEIDA, which sought a clarification from the Authority for Advance Ruling regarding the applicability of GST on premium and lease rent for plots allocated to hospitals under leases extending beyond 30 years.

Subsequently, the Authority for Advance Ruling had concluded that GST was not applicable, i.e., it was exempted on the upfront amount, provided the conditions specified under Serial Number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 32/2017-Central Tax (Rate) dated 13.10.2017, were met, added the Bench.

The bench determined that since no party had contested the aforementioned order and it had consequently achieved finality, it was perplexing to observe that YEIDA, which is not the revenue authority, opted to issue the communication dated 24.08.2018, to the petitioner.

Consequently, the Bench concluded that the Authority for Advance Ruling had provided a clear and unambiguous response to YEIDA's inquiry, and therefore, regarding the taxation or exemption of the transaction in question, there should never have been any doubt about its basic applicability.

The Bench observed that the legislature had opted to provide an unconditional exemption concerning the payment of upfront amounts. Even when amending Notification No. 32/2017, dated October 13, 2017, various alterations were introduced, including exempting certain activities for which plot allotments were made from taxation, and involving corporations where ownership by the Central Government or the State Government might surpass 50%. However, during the same amendment, no changes were made to the initial Notification to introduce any conditions for grant of that exemption.

As a result, the High Court ruled that the exemption made available to the petitioner by virtue of the original Notification read with an order of the Authority for Advance Ruling was unconditional, and consequently, the letter issued on behalf of YEIDA was wholly unfounded in law.

Cause Title: M/s Ram Kamal Healthcare Pvt. Ltd v. Union of India and Ors. [Neutral Citation: 2023: AHC: 191485-DB]

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Allahabad High CourtJustice Saumitra Dayal SinghJustice Vinod Diwakar

Pankaj Bajpai