A Delhi resident has approached the high court challenging the Delhi Development Authority’s (DDA) move to retrospectively levy goods and services tax (GST) on leasehold-to-freehold property conversions. The petitioner has termed the DDA’s March 28 standard operating procedure (SOP) “unconstitutional” and beyond the scope of the CGST Act, arguing that land transfers are explicitly excluded from the definition of “supply” under GST law.

The DDA move is likely to affect property owners who got their properties converted to freehold after the Central Goods and Services Tax (CGST) Act came into effect in 2017.

While also making the Ministry of Finance, Central Board of Indirect Taxes and Customs, the GST Council Secretariat and the Delhi government parties in the case, the petitioner, Mala Sahni Seth, requested the Delhi HC to declare the March 28 SOP issued by the DDA’s internal GST Cell unconstitutional and ultra vires the CGST Act.

“The impugned SOP without any statutory delegation, purports to create a new taxable event by re-characterising the statutory conversion of leasehold property into freehold tenure as a taxable ‘service’ and thereby retrospectively levying GST on such conversions,” the petition filed through counsel Saurab Seth stated.

The SOP, not being issued under or authorised by any provision of the CGST Act, or by the central government or the GST Council, constitutes an impermissible exercise of delegated legislative power and a colourable exercise of fiscal authority, it argued.

Seth, along with other joint owners of a property at DLF South Court Mall in Saket, got it converted to freehold in 2023 after paying the conversion charges. In April this year, relying on the March SOP, the DDA issued invoices, retrospectively levying GST of Rs 30.26 lakh on those payments.

According to the petitioners, the levy was wholly without jurisdiction, contrary to provisions in the CGST Act that expressly exclude sale or transfer of land from the ambit of “supply”.