Taxability of Movable and Immovable Property: Pre-GST vs. Post-GST Regime

Introduction

In the realm of Indian legislation, a crucial distinction lies between movable and immovable property. Understanding this distinction is vital because it determines which laws govern these properties, including aspects like limitation periods, registration, and property transfers. In the legal landscape, all things are categorized into three classes: immovable, movable, and those that move. Immovable property commonly refers to real estate (e.g., houses, factories), while movable property encompasses assets like computers, jewelry, and vehicles.

Goods: Defining the Foundation

Article 366(12) of the Indian Constitution defines ‘Goods’ to include all materials, commodities, and articles. It implies that only tradable or marketable movables fall within the ambit of ‘Goods.’

Movable Property

Movable property refers to assets that can be transferred from one place to another. Section 12(36) of the General Clause Act, 1847, defines movable property as “property of every description except immovable property.” This aligns with the Transfer of Property Act, 1882, which categorizes movable property as everything that is not immovable. The Indian Penal Code, 1860, further expands on this by explaining that movable property includes corporeal property of every description, except land and things permanently attached to the earth.

Immovable Property

In contrast, immovable property is defined under Section 2(26) of the General Clause Act, 1847, as including land, benefits arising from land, and things attached to the earth or permanently fastened to anything attached to the earth. ‘Attached to the earth’ is detailed in Section 3 of the Transfer of Property Act, 1882, as involving properties rooted in the earth (e.g., trees), imbedded in the earth (e.g., walls or buildings), or attached to something imbedded for permanent beneficial enjoyment.

Challenges in Distinguishing Immovable Property

Distinguishing immovable property from movable property is not always straightforward. For example, in the case of Quality Steel Tubes Ltd. Vs. Collector, the Supreme Court ruled that goods attached to the earth cease to be considered goods under the law. However, the case of Sirpur Paper Mills Ltd. Vs. CCE raised questions about what constitutes immovable property when the assembly of a papermaking machine was erected mainly from bought-out components.

The Bombay High Court, in Shapoorji Pallonji & Co. Vs. UOI, held that certain structures, like trusses, columns, and purlins, which are attached to the earth using nuts and bolts, do not qualify as excisable goods.

Taxability of Services Related to Immovable Property

Before GST: Service tax was applicable to taxable services associated with immovable property.

After GST: GST has replaced service tax. The type of GST to be applied depends on whether the supply is intra-state or inter-state, determined by the place of supply of the service.

Conclusion

In conclusion, immovable property cannot be classified as goods. Various legal definitions of ‘goods’ encompass all types of movable property. The courts have clarified that what is considered immovable or movable property can depend on specific circumstances. Machinery or components may be considered immovable when permanently fixed to structures embedded in the earth.

As the legal landscape evolves, the line between movable and immovable property may continue to blur. Therefore, it is essential to seek expert legal advice to navigate the nuances of property taxation.