C Shivakumar @ CHENNAI:
In a judgment with potential implications in public housing sector, the Madras High Court has directed the Tamil Nadu Housing Board (TNHB) to refund additional Goods and Services Tax (GST) it demanded from flat buyers after advertising prices as tax-inclusive.
The ruling, delivered by Justice D. Bharatha Chakravarthy on Monday, came in response to a batch of writ petitions filed by homebuyers in two residential projects developed by TNHB in Nandanam and Anna Nagar.
The buyers had challenged the post-sale demand for 5% additional GST, arguing that TNHB had expressly advertised the flat prices as inclusive of all taxes, and that the subsequent demand violated the promise it made to the home buyers.
TNHB justified the additional charge by citing a revised tax interpretation issued by the GST authorities after the sale. The housing agency contended that it faced a retrospective tax liability and was therefore entitled to recover the shortfall from buyers. The High Court rejected this argument, holding that a public agency cannot retroactively alter a commercial representation made to the public, especially in a context where buyers had no bargaining power and no opportunity to renegotiate terms.
The court found that TNHB’s advertisements had explicitly stated per-square-foot pricing as inclusive of GST, and the final sale agreements did not contain any clause allowing for additional tax collection. As such, the court ruled that the housing board, being the drafter of the agreement and in a dominant contractual position, must bear any ambiguity or financial consequence. The principle of contra proferentem—where ambiguities in contracts are interpreted against the drafter—was applied to reject TNHB’s stance.
Further, the court noted that TNHB had already budgeted for a 12% GST component on construction services, and had embedded it in the overall pricing. With a profit margin of 9% also built in, the court observed that there was sufficient scope within the original pricing for TNHB to absorb any miscalculation in its tax planning. It added that under Rule 35 of the Central GST Rules, when pricing is advertised as “inclusive,” the tax element must be treated as included in the gross amount, and cannot be recovered separately.
Accordingly, the court ordered TNHB to refund the additional 5% GST to those buyers who had paid under protest. For buyers who had refused to pay the extra amount, the board was directed to proceed with registration and execute sale deeds without delay. All eligible buyers who had paid the full advertised price were entitled to have their sale deeds executed within eight weeks.
Claims related to project delays and rental compensation were not adjudicated, with the court noting that such matters fell under the purview of the Real Estate (Regulation and Development) Act and must be pursued through the appropriate forum.
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