Punjab & Haryana High Court Rules PLC Not Separately Taxable, Sets Aside DLF Advance Ruling Orders

The Punjab and Haryana High Court on 13 May held that Preferential Location Charges (PLC) collected by developers for offering a preferred location within a housing project form part of the composite construction service and cannot attract separate taxation.

A Division Bench of Justices Deepak Sibal and Lapita Banerji allowed a writ petition filed by DLF Limited and quashed the Advance Ruling Authority order dated 28 August 2020 and the Appellate Authority for Advance Ruling order dated 28 March 2022, finding both inconsistent with the subsequent GST Council recommendation and the Government of India clarification. The judges held:

“..after accepting the recommendation made by the GST Council, acknowledged that the charges collected by developers like the petitioner against preferential location of an apartment would attract GST at the same rate as applicable to construction services before issuance of the apartment's completion certificate.”

DLF approached the Advance Ruling Authority in June 2019 seeking clarity on whether PLC collected from homebuyers should attract separate GST or form part of the principal supply of construction and development services. The Authority held that PLC constituted an independent supply and imposed separate tax liability, and the Appellate Authority affirmed this view.

The GST Council later examined the issue in its 54th meeting held on 9 September 2024 and recommended that PLC remains intrinsically linked to construction services and should attract the same GST treatment as the principal supply. Following this recommendation, the Ministry of Finance issued a clarification circular dated 11 October 2024 under Section 168(1) of the CGST Act.

The High Court noted that the clarification recognises PLC as an integral part of construction services and treats it as part of a composite supply where construction remains the principal supply, attracting GST at the same rate applicable to construction services before issuance of the completion certificate. It held:

“The Circular by the Government of India dated 11.10.2024, issued under Section 168(1) of the Act, binds the respondent-authorities. The Circular being in the nature of a clarification, would also have retrospective application..”

The Bench also held that the circular binds departmental authorities and applies retrospectively. It found that both the advance ruling and appellate ruling rested on a contrary interpretation and therefore could not survive.

Accordingly, the High Court quashed both orders and directed that consequential benefits flow to DLF Limited.

For Petitioner: Puneet Aggarwal, Advocate

For Respondent: Sourabh Goel, Senior Standing Counsel with Geetika Sharma, Advocate