Division Bench: VAT on land value unconstitutional; tax on goods post-sale only. Rule 25(2) upheld; State to align. Fresh assessments allowed.

The Division Bench held that charging VAT on developers based on the value of land was unconstitutional. Tax should only be on the value of goods transferred after sale agreements, excluding immovable property and pre-agreement activities. Rule 25(2) was upheld with modifications, directing the State Government to align the Rules accordingly. Assessment and revisional orders were set aside, allowing fresh assessments based on clarified principles. The writ petitions were partly allowed, with directions for future orders to align with the judgment. The present writ petition was disposed of similarly, with no costs awarded.

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Issues:
Challenge to Explanation (i) to Section 2(1)(zg) of the Haryana Value Added Tax Act, 2003 and Rule 25(2) of the Haryana Value Added Tax Rules, 2003 regarding the inclusion of the value of land for charging VAT on developers.

Analysis:
The writ petition challenged the constitutionality of Explanation (i) to Section 2(1)(zg) of the Haryana Value Added Tax Act, 2003 and Rule 25(2) of the Haryana Value Added Tax Rules, 2003, which included the value of land for VAT on developers. The Division Bench held that any provision seeking to charge tax on an amount beyond the value of goods in a works contract would be unconstitutional. The tax should be based on the value of goods transferred after the agreement for sale with buyers, with deductions specified to ensure taxation only on the value of goods transferred. The value of immovable property and any pre-agreement activities should be excluded. VAT on developers should be on the value of goods at the time of incorporation in the works, not on the transfer of immovable property. Rule 25(2) was upheld with modifications, and the State Government was directed to align the Rules accordingly.

The Division Bench disposed of the writ petitions by setting aside assessment and revisional orders based on circulars, allowing fresh assessments based on the clarified legal principles. Orders were to be passed in accordance with the interpretation provided. The competent authority could proceed with issuing orders where notices had been issued, following the legal principles outlined. The writ petitions were partly allowed with these directions.

Consequently, the present writ petition, being covered by the earlier judgment, was disposed of in the same terms. No costs were awarded in this matter.

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