November 19, 2025

Stamping out GST confusion

By Vijay Kumar

ONCE, a Commissioner of Income Tax (Appeals) asked me whether export incentives under Customs and CENVAT Credit could be taxed as income under the Income Tax Act. It reminded me: tax officers often moonlight in taxes they don't administer.

And now, stamp duty officers have discovered GST-lurking in lease deeds, waiting to be taxed.

You might think only the GST Department is confused about its own law, while WhatsApp professors remain the true experts. But here's a gem from the Delhi High Court: Gurdev Raj Kumar Vs Collector of Stamps- 2025-TIOL-1767-HC-DEL-GST. Of course, the petitioner didn't rely on WhatsApp forwards. He brought out the big guns-official notifications, circulars, and even Chennai's Inspector General of Registration.

The petitioner entered into a lease deed dated 01.07.2020 in respect of property in Vasant Vihar, New Delhi which unequivocally stipulated that the property shall be used solely for residential purposes.

On presentation of the lease deed for registration, the Sub-Registrar VII-A, impounded it under the Indian Stamp Act, 1899 on the alleged ground of deficient stamp duty, due to the purported applicability of GST and its inclusion for stamp duty computation.

Consequently, the matter was referred to the respondent - Collector of Stamps for adjudication and a show cause notice dated 20.07.2020 was issued to the petitioner. In response, the petitioner submitted detailed representations, asserting that:

i. Leases of residential property for residential purposes are exempt from GST under Entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, issued by the Department of Revenue, Ministry of Finance, Government of India.

ii. Even assuming applicability of GST, its component does not form part of lease rent for stamp duty purposes per Circular No. 3759/01/2015-2 dated 24.05.2019 issued by the Inspector General of Registration, Chennai.

The respondent Collector of Stamps rejected the petitioner's representations and in the impugned order dated 19.10.2020, directed payment of deficit stamp duty and penalty, aggregating to Rs. 2,58,700/-.

Without prejudice to his rights, the amount was deposited by the petitioner to facilitate registration, which took place on 19.11.2020. As they say, to buy peace and incidentally get the registration done.

Entry No. 12 of Notification No. 12/2017-Central Tax (Rate), issued by the Department of Revenue, Ministry of Finance, Government of India is as under:

The High Court's attention was drawn to the Circular dated 02.05.2018, bearing No. 44/18/2018-CGST issued by the Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India. The relevant extract of the said circular reads as under:

"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."

The counsel for the petitioner also placed reliance on Circular No. 3759/01/2015-2, issued by the Inspector General of Registration, Chennai 600028, which reads as under:

"Letter No.3759/J1/2015-2 Dated: 24/05/2019

Sir/Madam,

Sub: Stamp Duty-Levy of stamp duty on lease deeds-Executed by SIPCOT - Exclusion of water charges for the purpose of computing lease amount-clarification-reg.

Ref: 1. Advocate General of Tamil Nadu, Opinion No.54/AGVN/2019 dated 04.04.2019

2. The Principal Secretary to Government, Commercial Taxes and Registration Dept., Letter No.2237/J1/2019-2 dated: 09.04.2019.

It has been brought to the notice that based on the audit objection raised by the Accountant General regarding short levy of stamp duty on the lease deed executed by SIPCOT due to omission to include the water charges for calculating lease amount on which stamp duty has to be levied, the Registering officers insisted to pay the stamp duty for the supply of water in respect of lease deeds.

xxxx

Therefore, in view of the audit objection raised by the Accountant General, the question that arises for our consideration is whether the water is an immovable property and if so, the cost of supply of water has to be included into the lease amount for the purpose of levy of stamp duty.

With regard to above question, it is stated that in the case of Chief Controlling Revenue Authority Vs Anti Biotic Project Virbadhar reported in AIR 1979 AII 355, it was held as under: -

"It could be seen that water is neither land nor a tenement. Accordingly, water could be considered only as movable property. As the instrument does not create any right over any immovable property, the same could not be considered as a lease".

In view of the aforesaid dictum, it is clear that water is not an immovable property. Hence, the objection raised by the Accountant General in having treated the water as immovable property and hence the cost of supply of water (Both capital and running cost) has to be included in the lease amount for the purpose of levy of stamp duty is not legally sustainable.

Moreover, after the implementation of Goods and Services Tax (GST) by the Central Government on 01.07.2017 in question has been raised as to whether the GST payable by the lessee should be chargeable for stamp duty or not. The opinion of the Advocate General of Tamil Nadu was sought for on the point whether the GST payable by the lessee should be treated as part of rent as per the explanation provided under Article 35 of Schedule I to the Indian Stamp Act, 1899.

The Advocate General of Tamil Nadu in his opinion has stated that from the reading of the Explanation provided under Article 35 of the Schedule I to the Indian Stamp Act, 1899, it is clear that when the lessee undertakes to pay any recurring charges such as Government revenue, the landlord's share of cess and municipal tax, such amount shall be deemed to be a part of the rent and that GST on rent amount is obviously not a recurring charge on the property and that the explanation makes it clear that the charges contemplated are in nature of municipal rates or taxes or any other levy on the property itself and not on the lease rent and hence GST cannot be included as part of the rent for the purpose of chargeability of Stamp Duty. He has therefore opined that the GST payable by the lessee cannot be treated as part of the rent for the purpose of chargeability of Stamp Duty under the Indian Stamp Act, 1899.

It is therefore instructed that in respect of lease deeds and modified lease deeds executed by the SIPCOT, the Registering Officers should not treat the water as an immovable property for the purpose of levy of stamp duty and also the GST payable by the lessee cannot be treated as part of the rent for the purpose of chargeability of stamp duty and the deed has to be classified under Section 6 and Article 35 of Indian Stamp Act, 1899.

Upon perusal of the relevant notifications and circulars, the High Court found merit in the petitioner's submissions and held:

Entry No. 12 of the Central Tax Notification No. 12/2017 leaves no manner of doubt that renting/leasing of a residential dwelling for use as residence, is exempt from GST. As such, the view adopted by the respondent as regards deficit payment of stamp duty, is misconceived.

In view of the above, the impugned order dated 19.10.2020 is hereby quashed.

The respondent is directed to refund the amount of Rs. 2,58,700/- (including deficit stamp duty and penalty), deposited by the petitioner, within a period of six weeks.

Is water an immovable property - An interesting case: Allahabad High Court - Chief Controlling Revenue Authority Vs Anti Biotic Project Virbhadra (1979)

In case you're wondering, someone once tried to stamp duty water. The Allahabad High Court ruled: water flows, stamp duty doesn't.

An agreement was executed by The Governor of Uttar Pradesh and Indian Drugs and Pharmaceuticals Limited (a Government of India Undertaking) by which the State Government agreed to allow the Company to draw 11 cusecs of water from river Ganga at Rishikesh annually for a period of 25 years in consideration of yearly payment of Rs. 6,000/- per cusec, i.e. Rs. 66,000/- per annum. The Company had to make its own arrangement for taking the water supply from such place in the Ganga river as the Chief Engineer permitted.

The Allahabad High Court had to decide whether the agreement was a lease deed. For it to be lease, the water had to be immovable property.

The High Court referred to Black's Dictionary which explained--

"Water is neither land nor tenement nor susceptible of absolute ownership. It is a movable thing and must of necessity continue common by the law of nature. It admits only of a transient usufructuary property and if it escapes for a moment, the right to it is gone for ever, the qualified owner having no legal power of reclamation. It is not capable of being sued for by the name of ''water'' nor by the calculation of its cubical or superficial measure, but the suit must be brought for the land which lies at the bottom covered with water."

And the High Court held,

It could be seen that water is neither land nor a tenement. Accordingly, water could be considered only as movable property, As the instrument does not create any right over any immovable property, the same could not be considered as a lease.