Compulsory land acquisition compensation is outside GST where solatium is not consideration for a taxable supply.

Compensation paid for compulsory acquisition of land, including the solatium component, is not exigible to GST because it is part of acquisition compensation and not consideration for a taxable service. The Court held that Schedule II entry 5(e) applies only where there is an independent contractual obligation to do, refrain from, or tolerate an act for consideration, which was absent here. It also treated transfer of land as outside GST under Schedule III, so merely labelling part of the compensation as solatium does not create tax liability. On that basis, the GST notices and orders issued on the solatium component were without jurisdiction and liable to be quashed.

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Issues: (i) Whether compensation paid towards acquisition of land under the head of solatium is exigible to GST under the CGST/KGST regime; (ii) Whether the impugned notices and orders demanding GST on such amount are liable to be quashed.

Issue (i): Whether compensation paid towards acquisition of land under the head of solatium is exigible to GST under the CGST/KGST regime.

Analysis: The compensation was paid in the context of compulsory acquisition of immovable property and not pursuant to an independent agreement by which the landowners undertook an obligation to refrain from an act, tolerate an act, or do an act for consideration. The Court treated the so-called solatium component as part of compensation for acquisition and not as consideration for a taxable service. It held that Schedule II entry 5(e) applies only where there is a contractual supply with a direct nexus between the agreed obligation and consideration. It further held that acquisition and transfer of land fall outside GST in view of the statutory treatment of sale of land under Schedule III, and that the mere labeling of a component as solatium does not convert the transaction into a taxable supply.

Conclusion: The compensation paid towards acquisition of land under the head of solatium is not exigible to GST.

Issue (ii): Whether the impugned notices and orders demanding GST on such amount are liable to be quashed.

Analysis: Once the underlying levy itself was held unsustainable, the consequential notices and orders demanding GST on the solatium component could not survive. The Court accordingly treated the impugned proceedings as without jurisdiction and liable to be set aside.

Conclusion: The impugned notices and orders are liable to be quashed.

Final Conclusion: The petitions succeed, and the GST demands raised on the solatium component of land acquisition compensation cannot stand in law.

Ratio Decidendi: Compensation paid as part of compulsory acquisition of land, even if described as solatium, is not consideration for a taxable supply unless it arises from an independent contractual obligation to do, refrain from, or tolerate an act for consideration.

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