NEW DELHI: A resident of Delhi has challenged the standard operating procedure (SOP) of the Delhi Development Authority (DDA) in the high court. This SOP retroactively imposes goods and service tax (GST) on the conversion of leasehold properties into freehold. This move from the DDA could affect property owners who converted their properties to freehold after the Central Goods and Services Tax (CGST) Act came into effect in 2017. The high court is set to hear the case on Friday.
The petitioner, Mala Sahni Seth, has also included the Ministry of Finance, the Central Board of Indirect Taxes and Customs, the GST Council Secretariat, and the Delhi government as parties in the case. She requests the Delhi High Court to declare the DDA’s SOP, issued on March 28, unconstitutional and beyond the authority of the CGST Act.
According to her petition, “The impugned SOP, lacking any statutory delegation, attempts to create a new taxable event by categorizing the statutory conversion of leasehold property to freehold as a taxable ‘service,’ thereby imposing GST retrospectively on these conversions,” as stated by her counsel, Saurab Seth.
The petition further argues that the SOP, not issued or authorized under the CGST Act or by the central government or GST Council, represents an improper use of delegated legislative power and a misuse of fiscal authority.
In 2023, Seth, along with other co-owners of a property at DLF South Court Mall in Saket, converted it to freehold after paying the necessary conversion charges. In April, relying on the March SOP, the DDA issued invoices retroactively charging Rs 30.26 lakh in GST on these payments. The petitioners believe this levy is entirely without jurisdiction and contradicts the CGST Act’s provisions that specifically exclude the sale or transfer of land from the definition of “supply.”
