Karnataka High Court has clarified the legal position regarding the inclusion of Goods and Services Tax (GST) in the calculation of rental value for the purpose of stamp duty under the Karnataka Stamp Act, 1957. The decision arose from a writ petition challenging an order by the District Registrar, Shivajinagar, which had impounded a lease deed and directed the petitioner to pay stamp duty and penalty, including on the GST component of the rental value.
The petitioner argued that the impugned order was illegal to the extent it considered GST at 18% on rentals as part of the rental value for stamp duty purposes. Citing Article 30(2) of the Karnataka Stamp Act, 1957, the petitioner contended that only the average annual rent, premium, fine, and money advanced under the instrument should be considered for stamp duty, and not GST. The petitioner also referred to relevant government notifications and a Delhi High Court judgment to support the position that GST is a tax liability and not part of the consideration for lease transactions.
The State’s counsel did not dispute the petitioner’s contention, conceding that the rental value for stamp duty under Article 30 does not include GST. The Court examined Article 30(iii) of the Act, which prescribes the basis for stamp duty on leases exceeding one year and not exceeding ten years, and found that the statute only contemplates the average annual rent, premium, fine, and money advanced as the relevant components for stamp duty calculation.
Upon reviewing the impugned order, the Court noted that the authorities had erroneously included 18% GST in the calculation of the rental value, resulting in an inflated stamp duty demand. The Court emphasized that neither the Act nor the relevant government notifications authorize the inclusion of GST in the value of the instrument for stamp duty purposes. The Court held that the imposition of stamp duty and penalty on the GST component was unsustainable in law.
Consequently, the Court directed that the petitioner is entitled to a refund of the proportionate stamp duty and registration fee paid on the GST component. The respondent authorities were ordered to process the refund within three months from the date of receipt of the certified copy of the order. The writ petition was accordingly disposed of, reinforcing the principle that GST is not to be included in the rental value for stamp duty assessment under the Karnataka Stamp Act.
Case Reported at:
Case Name: Tata Consultancy Services Ltd. v. State of Karnataka and Ors.
Case Citation: (2026) taxcode.in 1107 HC
