Facts of the Case

The petitioner, NBCC (India) Limited, a Government of India enterprise, acted as the implementing agency for redevelopment of Kidwai Nagar (East), New Delhi, pursuant to a Memorandum of Understanding dated 16.07.2013 with the Ministry of Urban Development. An escrow agreement was executed between NBCC, the Ministry, and Union Bank of India for collection and management of lease proceeds arising from the project. An investigation was initiated by the Directorate General of GST Intelligence alleging that GST was payable by NBCC on lease amounts collected and credited to the escrow account. An adjudication order dated 29.01.2025 was passed raising GST demand of ₹45.36 crore for FY 2017-18 against NBCC.

Issues Involved

Whether NBCC, acting as an agent and implementing arm of the Government, could be held liable to pay GST on lease proceeds deposited in an escrow account, whether Section 86 of the CGST Act creates joint and several liability for services rendered by an agent on behalf of the principal, and whether the GST demand ought to be raised against NBCC or the Ministry as the principal supplier.

Petitioner’s Arguments

NBCC contended that it acted purely as an implementing agency of the Ministry and did not appropriate lease proceeds as its own revenue. It was argued that the funds collected were deposited in an escrow account operated under the control of the Ministry and ultimately credited to the Consolidated Fund of India. NBCC further submitted that GST, if at all applicable, was either exempt or payable under reverse charge by the recipients, and that Section 86 of the CGST Act applies only to goods and not to services.

Respondent’s Arguments

The GST Department argued that NBCC, acting as an agent of the Ministry, rendered taxable leasing services and was therefore liable to discharge GST on the lease amounts collected through the escrow mechanism.

Court Order / Findings

The Delhi High Court noted that pursuant to directions of the Court, a meeting was held between senior officials of the Ministry of Housing and Urban Affairs and the Ministry of Finance. An Office Memorandum dated 30.11.2025 issued by the Ministry of Finance categorically concluded that the GST demand raised against NBCC had no merit. The Court observed that Section 86 of the CGST Act creates joint and several liability only in respect of goods and does not extend such liability to services. The Court further held that where the Ministry is the principal supplier and is available to accept any GST liability, initiation of proceedings against the agent is without authority of law. In view of the clear stand taken by the Ministry of Finance, the impugned order was held to be unsustainable.

Important Clarification

The Court clarified that GST liability, if any, in respect of leasing of commercial space under the Kidwai Nagar redevelopment project lies with the principal, namely the Ministry, and not with NBCC acting as an implementing agency. The Court also clarified that Section 86 of the CGST Act cannot be invoked to fasten GST liability on agents in respect of services.

Final Outcome

The writ petition was allowed. The GST demand raised against NBCC (India) Limited vide order dated 29.01.2025 was set aside in entirety, and the proceedings against the petitioner were quashed. Pending applications, if any, were also disposed of.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS09122025CW66872025_143836.pdf

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