Delhi High Court Quashes GST Demand Against NBCC for Kidwai Nagar Project

Court Rules Joint Liability Under Section 86 of CGST Act Applies Only to Goods, Not Services

In a significant ruling, the Delhi High Court has set aside a GST demand of Rs. 45.36 crore against M/s NBCC (India) Limited concerning the redevelopment project of Kidwai Nagar East in New Delhi. The judgment, delivered by a bench comprising Justices Prathiba M. Singh and Shail Jain, clarifies that Section 86 of the Central Goods and Services Tax (CGST) Act, 2017, which imposes joint and several liability on agents and principals, is applicable only to goods and not services.

The controversy arose when the Directorate General of GST Intelligence (DGGI) initiated investigations into the GST liabilities of NBCC, acting as an agent for the Ministry of Urban Development (now Ministry of Housing and Urban Affairs) under a 2013 Memorandum of Understanding (MoU). The GST department contended that NBCC failed to discharge GST on lease receipts amounting to approximately Rs. 252.01 crore during the financial year 2017-18, resulting in the substantial demand.

However, the Ministry of Finance intervened, issuing an office memorandum stating that the demand had no merit, as the statutory provisions under Section 86 do not extend to services. The Ministry emphasized that NBCC operated as an executing agency, with all proceeds managed in an escrow account controlled by a committee, thereby negating any liability on NBCC's part.

The High Court, acknowledging the Ministry's stance, ruled that the GST demand was unwarranted, thereby quashing the impugned order of January 2025. The decision reinforces the legal distinction between goods and services under the CGST Act, providing much-needed clarity for similar cases in the future.

This judgment underscores the importance of precise statutory interpretation and the necessity of distinguishing between goods and services in taxation matters. Legal experts anticipate that this ruling will have a significant impact on how joint liability is approached under the CGST Act, particularly in cases involving agency relationships.

Bottom Line:

GST liability - Demand raised against agent for supply of services on behalf of principal - Section 86 of CGST Act, 2017 creating joint and several liability applies only to goods, not services - Ministry of Finance opined that the demand has no merit.

Statutory provision(s): Central Goods and Services Tax Act, 2017, Section 86

M/S NBCC (India) Limited v. Additional Commissioner CGST Delhi South, (Delhi)(DB) : Law Finder Doc Id # 2821060