LUCKNOW Tightening the noose around tax evaders in the mining and real estate sectors, the Uttar Pradesh state tax department has launched an aggressive drive identifying significant GST revenue leakages, bringing hundreds of entities under the tax net and initiating recovery proceedings worth more than ₹1100 crore, officials dealing with the issue disclosed.
A dedicated team at the state tax headquarters, rigorously monitoring suspicious dealers for three months, has uncovered widespread non-compliance in the two key sectors, revealing that nearly one-third of lease contractors in the mining sectors have been operating outside the tax net.
Principal secretary, state tax, M Devraj said: “Rigorous monitoring of the mining and the real estate sectors has yielded positive results. Tax demands have been issued to evaders and recoveries being made as per law.”
As per details shared to the state tax authorities by the directorate of geology and mining, in the mining sector alone, out of 1,618 leaseholders identified, only 891 are registered with the state tax department.
“As many as 501 leaseholders are being brought under GST registration, while the status of another 404 is under verification. The department is now matching their outward supply of goods such as sand, Morang and stone chips to various departments and other clients with figures shown in their GST returns,” state tax department officials said.
According to tax officials, the value of supplies shown in GST returns should be at least five times the royalty paid to the government. Based on this assessment, the department has estimated a GST recovery of around ₹765 crore from the 891 registered leaseholders alone for the financial years 2019–20 to 2022–23.
The year-wise estimate includes ₹65.26 crore in 2019–20, ₹201.99 crore in 2020–21, ₹208.96 crore in 2021–22 and ₹288.61 crore in 2022–23. “However, the department faces a significant hurdle in immediate recovery due to pending litigation in the Supreme Court, which may delay the collection process,” the official pointed out.
The mining sector in UP has always been under the cloud with powerful politicians and musclemen having their stakes in this field. And powerful people being associated with this sector often makes enforcement work difficult for the departments concerned, according to officials.
In parallel, the department has raised a tax demand of ₹374.81 crore against 151 commercial real estate developers for failing to pay GST on additional construction rights such as transferable development rights (TDR), floor space index (FSI) and floor area ratio (FAR). These instruments, which allow developers to build extra floors or increase built-up area, are not land sales but qualify as taxable services under GST law.
“So far, ₹11.68 crore has been deposited by commercial builders. Of this amount, ₹9.36 crore is FAR/FSI and ₹2,32 crore lease amount. Action is under way to recover the balance,” another state tax department official said. The state currently has 1,007 registered real estate developers.
Under Section 2(102) of the UPGST Act, 2017, services include anything other than goods. Courts have consistently ruled that transactions involving TDR, FSI, and FAR are “services” and therefore taxable, the official said, adding that many builders and development authorities had not been paying GST under this head.
The intensified crackdown, overseen by principal secretary Devraj in the government and state tax commissioner Nitin Bansal at the headquarters, is part of the department’s broader drive to widen the tax base and enhance GST collections across critical sectors.
With potential recoveries exceeding ₹1100 crore from both sectors combined even as further investigations are still on, this crackdown, it is believed, could significantly boost the state’s GST collections and set a precedent for stricter compliance monitoring in other sectors as well.
The success of this initiative, according to the officials, will largely depend on the resolution of pending legal challenges and the department’s ability to effectively pursue recovery proceedings against non-compliant taxpayers.
