The Karnataka High Court, in Sai Sravanthi Infra Projects Pvt. Ltd. & Ors. v. State of Karnataka & Ors., has partly allowed a writ petition challenging various charges demanded by the Bangalore Development Authority (BDA) as a condition for sanctioning a development plan. The Court held that the BDA could not demand scrutiny fee, ground rent or security deposit in the absence of statutory authority and further ruled that CGST and SGST could not be collected merely for sanctioning a building plan.
The judgment was delivered by Justice R. Nataraj on 21 July 2026 in Writ Petition No. 5188 of 2022, reported as 2026:KHC:37659. The dispute arose from a demand notice dated 18 February 2022 requiring the petitioners to pay an aggregate amount of approximately ₹4.43 crore under various heads, including scrutiny fee, ground rent, development fee, labour welfare fund, security deposit, CGST and SGST. The demand statement appearing on pages 5 and 6 of the judgment records these components in detail.
BDA Had No Statutory Authority to Collect Certain Charges
The High Court examined the powers available to the Bangalore Development Authority under the Bangalore Development Authority Act, 1976. It observed that Section 29 permits the BDA Commissioner to exercise powers of a Municipal Corporation Commissioner under the Karnataka Municipal Corporations Act only after issuance of an appropriate notification by the State Government.
The Court found that there was no provision under the BDA Act authorising the collection of ground rent, scrutiny fee and security deposit in the manner demanded from the petitioners. It relied upon the principles laid down in Mr. Sunderam Shetty v. State of Karnataka, where similar levies had been examined and the requirement of statutory authority and reasonable correlation between a fee and the service rendered had been emphasised.
Accordingly, the demand dated 18 February 2022, insofar as it related to scrutiny fee, ground rent and security deposit, was quashed.
Labour Welfare Cess Cannot Be Collected Entirely Upfront
A significant issue before the Court concerned the demand for labour welfare cess at the stage of obtaining building plan sanction.
The petitioners relied on the Building and Other Construction Workers’ Welfare Cess Act, 1996 and Rule 4 of the Building and Other Construction Workers’ Welfare Cess Rules, 1998, contending that where construction extends beyond one year, cess is required to be collected in the manner and at the stages prescribed under the statutory rules rather than as a single upfront payment.
The High Court accepted that labour welfare cess remained legally payable but held that it could not be demanded upfront contrary to the statutory mechanism. The BDA was therefore directed to collect the cess in the manner prescribed under Rule 4 of the 1998 Rules.
No CGST or SGST on Sanctioning of Building Plan
The Court also dealt directly with the GST component included in the impugned demand.
It held that the BDA was not entitled to collect CGST and SGST because there was no supply of goods or provision of services in sanctioning the building plan. Consequently, the GST component of the demand could not be sustained.
This finding is particularly relevant from the GST perspective because the Court linked the permissibility of the tax directly to the existence of a taxable supply while examining the nature of the building plan sanction process.
Fresh Demand and Release of Sanctioned Plan Directed
While partly allowing the petition, the High Court directed the BDA to raise a fresh demand limited to labour cess in accordance with Rule 4 of the Building and Other Construction Workers’ Welfare Cess Rules, 1998. The fresh demand was required to be issued within one month from receipt of the Court’s order.
The BDA was further directed to release the duly sanctioned plan in favour of the petitioners within the stipulated period. The petitioners were required to furnish an affidavit undertaking to pay the disputed charges if those charges were ultimately held constitutionally valid in the pending proceedings.
Order Subject to Pending Writ Appeal
The High Court specifically clarified that its directions would remain subject to the outcome of W.A. No. 1226 of 2025. The appeal concerns the judgment in M/s Sapthagiri Shelters v. State of Karnataka, in which amendments introduced to support certain municipal levies had been quashed.
Therefore, while the present judgment grants immediate relief against the impugned demand, the final position concerning the disputed levies remains linked to the outcome of the pending writ appeal.
Key Takeaway
The Karnataka High Court has reaffirmed that statutory and local authorities cannot impose fees or charges merely by administrative circular unless the levy is supported by law. In the present case, the BDA’s demand for scrutiny fee, ground rent and security deposit was set aside; labour welfare cess was held collectible only according to the statutory mechanism; and CGST and SGST were held inapplicable to the sanctioning of the building plan.
The ruling is important for developers, real estate businesses, tax professionals and legal practitioners dealing with building plan approvals, municipal levies, labour welfare cess and GST implications arising from regulatory approvals.
Case Details
Case: Sai Sravanthi Infra Projects Pvt. Ltd. & Ors. v. State of Karnataka & Ors.
Court: High Court of Karnataka at Bengaluru
Coram: Hon’ble Mr. Justice R. Nataraj
Case No.: Writ Petition No. 5188 of 2022 (BDA)
Neutral Citation: 2026:KHC:37659
Date of Judgment: 21 July 2026
Result: Writ petition partly allowed.
