Land Acquired by Govt? GST Cut Was Illegal

Karnataka High Court ruled that compulsory land acquisition by the government is not a 'supply' under GST law. Any GST deducted from compensation paid to landowners must be refunded — with 15% interest. Tax officers who wrongly applied GST can be held personally liable.

Here's what happened: Karnataka High Court ruled that compulsory land acquisition by government authorities does not qualify as a 'supply' under the GST Act, making any GST levy on compensation payments unconstitutional.. The court ordered a full refund of GST wrongly deducted from the landowner's compensation, along with 15% interest from the date the deduction was made.. In an unusually strong move, the court directed personal recovery of the 15% interest amount and ₹50,000 in costs from the responsible tax officer — not just the department..

What you should do: Check your land acquisition compensation documents: if any GST amount was deducted before payment, you have legal grounds to claim a refund with 15% interest.. File a refund application with the GST department citing the Karnataka HC ruling that compulsory acquisition is not a taxable supply — attach all payment slips showing the deduction.. Consult a tax advocate if the acquiring authority refuses the refund; this judgment gives you strong grounds to approach your state's High Court for relief and interest recovery..

Compulsory acquisition compensation is also largely exempt from income tax under Section 96 of the RFCTLARR Act — so if GST was wrongly deducted AND income tax was applied, you may have grounds to challenge both deductions simultaneously.