The Delhi High Court, in Mr. Gurdev Raj Kumar v. Collector of Stamps (Government of NCT Delhi), ruled that demanding deficient stamp duty and penalty on a residential lease deed by including GST and water charges in the lease rent computation is legally unsustainable. The petitioner had leased a property solely for residential use, contending that such leases are exempt from GST under Entry No. 12 of Notification No. 12/2017-Central Tax (Rate). The High Court observed that this statutory exemption makes the inclusion of GST in the lease rent for stamp duty calculation misplaced. Furthermore, the court held that water charges cannot be included as water is not considered immovable property under the Indian Stamp Act, 1899. The court also noted that GST is not a recurring charge on the property for stamp duty purposes. Consequently, the court quashed the order demanding deficient stamp duty and penalty, and directed the Respondent to refund the amount paid by the petitioner within six weeks, reinforcing that GST and water charges should not inflate the stamp duty base for residential leases.
Facts:
Mr. Gurdev Raj Kumar (“the Petitioner”) entered into a lease deed dated July 1, 2020, with Optimum Therapeutics Private Limited concerning property that shall be used solely for residential purposes as unequivocally stipulated in Clause 6 of the lease deed.
The Collector of Stamps, Govt of NCT Delhi (“the Respondent”) directed the Petitioner to pay deficient stamp duty of Rs. 51,740 along with penalty of Rs. 2,06,960, alleging that GST was applicable and should be included for stamp duty computation.
The Petitioner contended that leases of residential property for residential purposes are exempt from GST as per Entry No. 12, Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017, and that even if GST were applicable, it does not form part of lease rent for stamp duty purposes as per Circular No. 3759/01/2015-2 dated May 24, 2019.
The Respondent contended the necessity of including GST and water charges in lease rent for calculating stamp duty.
The Petitioner challenged the order by way of writ petition, seeking quashing of the impugned order dated October 19, 2020, and refund of additional amount paid.
Issues:
- Whether GST leviable on renting/leasing of residential dwellings for residential use under GST?
- Whether the GST and water charges are includible in the lease rent for the purpose of stamp duty computation on residential lease deeds under the Indian Stamp Act, 1899?
Held:
The Hon’ble Delhi High Court in W.P.(C) 1463/2021 held as under:
- Observed that, Entry No. 12 of Notification No. 12/2017-Central Tax exempts renting/leasing of residential dwellings for residential use from GST, thus GST inclusion in lease rent is misplaced.
- Noted that, water is not an immovable property and thus cannot be included in lease rent for stamp duty calculation.
- Noted that, GST on rent is not a recurring charge on the property under the Explanation to Article 35, Schedule I of the Indian Stamp Act, 1899, supported by the Advocate General of Tamil Nadu’s Opinion No.54/AGVN/2019 dated April 04, 2019 in Circular No. 3759/01/2015-2 dated May 24, 2019.
- Quashed the impugned order demanding deficient stamp duty and penalty and directed the Respondent to refund Rs. 2,58,700/- paid by the Petitioner within six weeks.
Our Comments:
The Court relied on statutory notifications exempting GST on residential leasing and important circulars clarifying that GST is not part of lease rent for stamp duty computation. The judgment categories water as movable property by relying on the decision in the case of Chief Controlling Revenue Authority v. Anti Biotic Project Virbadhar [AIR 1979 AII 355], hence excluding water charges from lease rent calculations for stamp duty, reinforcing the principle of immovable property focus under Section 2(16) of the Indian Stamp Act and Section 105 of the Transfer of Property Act, 1882.
Relevant Provisions:
Section 2(16) of the Indian Stamp Act, 1899.
“(16) Lease. — “lease” means a lease of immovable property, and includes also—
a. a patta;
b. a kabuliyat or other undertaking in writing, not being a counterpart of a lease, to cultivate, occupy, or pay or deliver rent for, immovable property;
c. any instrument by which tolls of any description are let;
d. any writing on an application for a lease intended to signify that the application is granted;”
Entry No. 12, Notification No. 12/2017-Central Tax (Rate), dated June 28, 2017:
S No: 12. Chapter 9963 or Heading 9972 – Services by way of renting of residential dwelling for use residence – Nil Nil
Circular No. 44/18/2018-CGST dated May 02, 2018.
“5. To sum up, the activity of transfer of ‘tenancy rights’ is squarely covered under the scope of supply and taxable per-se. Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable. However, renting of residential dwelling for use as a residence is exempt [Sl. No. 12 of notification No. 12/2017-Central Tax(Rate)]. Hence, grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt. As regards services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST.”
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