Karnataka High Court says NO
In Sai Sravanthi Infra Projects Pvt. Ltd. v. State of Karnataka, decided on 21 July 2026, the Karnataka High Court has delivered an important ruling on the legality of various charges demanded by the Bangalore Development Authority (BDA) for sanctioning a building plan.
The petitioners were confronted with a demand of about ₹4.43 crore, comprising scrutiny fee, ground rent, development fee, security deposit, labour welfare fund and CGST/SGST.
The Court drew a clear distinction between the different components of the demand.
First, the BDA had no statutory authority under the Bangalore Development Authority Act, 1976 to levy ground rent, scrutiny fee or security deposit. Following the earlier decision in Sunderam Shetty, the Court held that such levies cannot survive merely because another authority was imposing similar charges.
Second, the Court held that labour welfare cess cannot be demanded upfront at the stage of sanction of the building plan. The cess has to be collected in the manner prescribed under Rule 4 of the Building and Other Construction Workers’ Welfare Cess Rules, 1998.
Third—and of particular GST significance—the Court categorically held:
“There is no supply of goods or provision of services in sanctioning the building plan.”
Consequently, the BDA was held not entitled to collect CGST and SGST on such charges.
The judgment thus brings into sharp focus a fundamental GST proposition:
Every statutory levy or charge collected by a governmental authority does not automatically become consideration for a “supply”.
The existence of a statutory power to collect an amount and the existence of a taxable “supply” under the GST law are two distinct questions.
The Court has, therefore, struck down the demand for scrutiny fee, ground rent and security deposit, directed that labour cess be collected only in accordance with the prescribed statutory mechanism, and specifically prohibited collection of CGST and SGST on the building-plan sanctioning process. The directions remain subject to the outcome of the pending appeal in W.A. No.1226/2025.
A significant judgment, therefore, not merely on the legality of municipal/development charges, but also on the fundamental GST question: whether an exercise of statutory/regulatory power by a governmental authority can, by itself, constitute a “supply”.
A copy of the judgment is attached.
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