HC Remands AAAR Ruling on GST Applicability of Land Conversion Fees

Case Details: Manappuram Finance Ltd. vs. Union of India - [2026] 185 taxmann.com 766 (Kerala)

Judiciary and Counsel Details

• Devan Ramachandran & Basant Balaji, JJ.
• Anish P., Akhil Shaji, R. Jaikrishna, Kum.Narayani Harikrishnan, C.S.Arun Shankar & K. Suresh Chandran, Advs. for the Petitioner.
• Renjish S. Menon, CGC, P.R.Sreejith & Smt Thushara James, Advs. for the Respondent.

Facts of the Case

The petitioner sought an advance ruling on the applicability of the reverse charge mechanism to fees paid under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2008, for the change of land description and permission to construct an office complex for business purposes. The application for advance ruling required adjudication on whether such payment constituted a ‘supply’ and, alternatively, whether the transaction stood excluded under Section 7(2). It was contended that both aspects formed part of a composite inquiry and required determination together. It was submitted that authority had confined themselves only to the question of exclusion under Section 7(2), without examining whether the activity itself fell within the scope of ‘supply’ under Section 7(1). The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the inquiry raised before the Authorities for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) necessarily involved two interconnected issues, namely whether the payment constituted a ‘supply’ under Section 7(1) of the CGST Act and the Kerala GST Act and, thereafter, whether any exclusion under Section 7(2) applied. It was held that both Authorities had examined only the applicability of the constitutional exclusion linked to Articles 243G and 243W of the Constitution of India, without adjudicating the foundational issue relating to the existence of a ‘supply’. The Court observed that omission to determine the first limb of the inquiry rendered the adjudicatory exercise incomplete and legally unsustainable. The matter was remanded for fresh consideration.