Agent Can’t Be Taxed For Services Of Principal: Delhi High Court Quashes Rs. 45.36 Cr GST Demand On NBCC

The Delhi High Court has set aside a Rs. 45.36 crore Goods and Services Tax (GST) demand raised against M/s NBCC (India) Limited in connection with the redevelopment of Kidwai Nagar (East), holding that the agent cannot be taxed for services of principal. The Bench of Justice Prathiba M. Singh and Justice Shail Jain has observed that Section 86 of the CGST Act creates joint and several liability only for goods, not services. When NBCC acted merely as an executing/implementing agency, GST demand (if any) lies on the Principal Ministry, not the agent. Escrow-based government redevelopment projects cannot be mechanically taxed. NBCC (India) Limited, a Government of India enterprise, was appointed as the implementing agency for the redevelopment of Kidwai Nagar (East) under a Memorandum of Understanding (MoU) signed with the Ministry of Urban Development (now Ministry of Housing and Urban Affairs) on July 16, 2013. The project involved construction of General Pool Residential Accommodation along with commercial spaces. To manage the lease proceeds generated from the project, an escrow mechanism was put in place through an agreement between NBCC, the Ministry, and Union Bank of India. Under this arrangement, the lease amounts collected from occupants were deposited into an escrow account, with the funds ultimately meant for the Ministry or the Consolidated Fund of India. The Directorate General of GST Intelligence (DGGI), Mumbai, initiated an investigation alleging that NBCC was liable to pay GST on lease amounts collected for commercial spaces. Based on this, the CGST Delhi South Commissionerate passed an order confirming a GST demand of ₹45.36 crore on receipts of approximately ₹252.01 crore for the financial year 2017–18. NBCC contended that it acted only as an executing and implementing agency on behalf of the Ministry and did not appropriate the lease proceeds as its own revenue. It further argued that amounts received from government departments and autonomous bodies were exempt from GST, while in other cases, tax liability, if any, arose under the reverse charge mechanism. Therefore, according to NBCC, the GST demand raised against it was untenable. During earlier hearings, the High Court directed the GST Department and the Ministry concerned to clarify their stand and resolve the issue at the inter-ministerial level. Pursuant to the Court’s directions, a meeting was held on July 10, 2025, under the chairmanship of a Joint Secretary, and the matter was examined by senior officials of the Ministry of Finance and the Ministry of Housing and Urban Affairs. An affidavit was subsequently filed placing on record the outcome of these deliberations. Crucially, the Ministry of Finance issued an Office Memorandum dated November 30, 2025, categorically stating that the GST demand raised against NBCC had no merit. The memorandum noted that Section 86 of the CGST Act, 2017, which provides for joint and several liability of an agent and principal, applies only to the supply of goods and not to services. Since the case involved leasing of commercial space, which is a supply of services, the Ministry observed that there was no statutory provision under the CGST Act to fasten joint and several liability on NBCC as an agent. The memorandum further stated that where the Ministry itself was the principal supplier and was available to accept any tax liability, initiating proceedings against NBCC was unnecessary and lacked legal authority. Taking note of the unequivocal stand of the Ministry of Finance, the Delhi High Court held that the GST demand raised by CGST Delhi South could not be sustained. The Bench accordingly set aside the impugned adjudication order dated January 29, 2025, and disposed of the writ petition. The Court observed that, in light of the Government’s own interpretation of the law and facts, continuation of the demand against NBCC was unjustified. All pending applications in the matter were also disposed of. Case Details Case Title: M/S NBCC (India) Limited Vs Additional Commissioner CGST Delhi South Case No.: W.P.(C) - 6687/2025 Date: 11/12/2025 Counsel For Petitioner: Bhuvnesh Satija Counsel For Respondent: Samiksha Godiyal Click Here To Read Order Read More: Endorsement Requirement Can’t Apply Retrospectively: Karnataka HC Quashes GST Demand Based on Prospective SEZ Rules

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