Builder Cannot Deduct GST From Refund of Booking Amount if No Such Clause Exists in Sale Agreement | HC

Case Details: Emerald Haven Realty Developers (Paraniputhur) (P.) Ltd. vs. S.V. Ramesh - [2025] 171 taxmann.com 321 (Madras)

Judiciary and Counsel Details

• Mrs J. Nisha Banu & R. Sakthivel, JJ.
• Satish Parasaran, Senior Counsel & Rahul Balaji for the Appellant.
• Devaraj & Siddharath Bhandari for the Respondent.

Facts of the Case

The assessee, a real estate developer, launched a residential project, wherein the respondent’s father booked an apartment and made an advance payment towards its purchase. However, due to the sudden demise of his father, the respondent chose not to proceed with the purchase and formally requested a refund of the amount paid. In response, the assessee refunded the amount after deducting 10% of the total sale consideration as cancellation charges, along with an additional deduction towards GST. Aggrieved by the deduction of GST, the respondent filed a complaint before the Real Estate Regulatory Authority (RERA), challenging the deduction. RERA, after due consideration, partly allowed the complaint and directed the refund of the GST amount. The assessee, dissatisfied with the order, filed an appeal before the Appellate Tribunal. The Appellate Tribunal, through the impugned order, upheld RERA’s decision, noting that the Sale and Construction Agreement did not explicitly authorize the deduction of GST in case of cancellation. Additionally, it was observed that the GST deduction was introduced for the first time in an email correspondence from the assessee regarding cancellation charges, without any prior contractual basis or valid justification.

High Court Held

The Hon’ble Madras High Court held that the respondent was entitled to withdraw the pre-deposit amount made by the assessee before the Appellate Tribunal under the RERA Act, as the respondent’s application for a refund of the GST amount was still pending before the tax authorities. The Court further ruled that the assessee was not entitled to deduct GST before refunding the amount to the respondent, given the absence of any contractual provision justifying such a deduction. Consequently, the appeal against the impugned order was dismissed, and the decision of the Appellate Tribunal was upheld, reaffirming that deductions towards GST in such cases must be backed by statutory or contractual authority.

List of Cases Reviewed

• Judgment of the Tamil Nadu Real Estate Appellate Tribunal, Chennai dated 07.08.2024 in Appeal No. 18 of 2024 (Para 10) affirmed.