2022 (1) TMI 1300 - AAR - GST

Levy of GST - supply or not - transfer of Leasehold land which includes other services such as Electricity Line, Water Line, Drainage Line, Road, Sewerage Line etc. like in case of plotted development - transfer of ownership of Freehold land which includes other services such as Electricity Line, Water Line, Drainage Line, Road, Sewerage Line etc. like in case of plotted development - Annual Lease Rent - whether service provider can claim ITC on their inward goods and services? HELD THAT - The development work done by the applicant is for whole parcel of land under Area Based Development and not for a given plot which is being sold to the buyer. RSCCL have been assigned with powers vested with Ranchi Municipal Corporation and the Area Based development of 647.30 Acres land under Smart City Mission is being done by RSCCL under the capacity and powers vested with Ranchi Municipal Corporation, assigned to them by Government of Jharkhand. The Central Government and Jharkhand Government have provided grants to RSCCL for Area Based Development of land. It appears that the activity of the appellant is absolute sale/ lease of land. The RSCCL are realizing only the price of land/ lease amount from the buyer/ lessee and the development cost of 647.30 Acres of land is borne by the Government. The development of individual plots by way of obtaining water/ drainage/ power connection or construction and maintenance of any road or electric installation etc. is the responsibility of the buyer. The sale of land is neither supply of goods nor supply of service as per Serial No. 5 to the Schedule III of CGST Act. The applicant are not liable to pay tax on the amount received by them against allotment of land on free hold basis for the entire consideration amount of sale deed/ e-auction bidding amount. Financial Business Area in not been defined in the statute. However, in common parlance, Financial Business Area or Financial District or Central Business District is often the commercial and business centre of a city, having a number of financial firms. The Government of Jharkhand, in association with Government of India, is developing Smart City with the concept of having Industrial Zones, Commercial Zones, Residential Zones, Public/ Semi-public Zones and Mixed Use Zones. The leasing of industrial plots or plots for development of infrastructure for financial business by RSCCL, a Government entity, to the industrial units or the developers in this Area Based Developed property for commercial/ mixed use is exempted from the tax. In cases other than that, the applicable rate of Goods Services Tax in case of leasing services is 18%.

Summary

Issues Involved:
1. Applicability of GST on transfer of Leasehold land.
2. Applicability of GST on transfer of ownership of Freehold land.
3. Applicability of GST on Annual Lease Rent.
4. Applicability of GST Rate on the above cases.
5. Eligibility to claim Input Tax Credit (ITC) on inward goods and services.

Issue-wise Detailed Analysis:

1. Applicability of GST on transfer of Leasehold land:
The ruling discusses that leasing of land is treated as a supply of service under Schedule II of the CGST Act, 2017, specifically under entry 2(a) which states, "any lease, tenancy, easement, licence to occupy land is a supply of services." Leasing services involving residential and non-residential property are covered under SAC 997211 and SAC 997212 respectively, with an applicable GST rate of 18%. However, Notification No. 12/2017-Central Tax (R) dated 28.06.2017 exempts GST on the upfront amount for long-term leases (thirty years or more) of industrial plots or plots for development of infrastructure for financial business provided by government entities. The ruling concludes that if the leasing of property by RSCCL falls under this notification, it is exempt from tax; otherwise, it is a taxable supply of service.

2. Applicability of GST on transfer of ownership of Freehold land:
The ruling clarifies that "sale of land" is covered under Schedule III of the CGST Act, 2017, and is excluded from GST levy as it is neither a supply of services nor a supply of goods. The ruling emphasizes that the development activities carried out by RSCCL do not change the nature of the land. The sale of land, even after development, remains a sale of land and is not taxable. The consideration received by RSCCL against the transfer of ownership of Freehold land is not subject to GST.

3. Applicability of GST on Annual Lease Rent:
The ruling states that leasing of land for commercial purposes is a taxable supply of service under entry 2(a) of Schedule II of the CGST Act, 2017, and attracts GST at the rate of 18%. This applies to annual lease rent charged by RSCCL.

4. Applicability of GST Rate on the above cases:
The ruling provides a summary of GST applicability:
- The amount received by RSCCL against the transfer of ownership of Freehold land is not taxable under the GST Act.
- The amount received against the transfer of Leasehold land is taxable under leasing services and attracts GST at 18%, unless exempt under Notification No. 12/2017-Central Tax (R) dated 28.06.2017.

5. Eligibility to claim Input Tax Credit (ITC) on inward goods and services:
The ruling concludes that RSCCL, as a service provider, cannot claim ITC on their inward goods or services. This decision is based on the nature of their activities and the specific provisions of the GST Act.

Ruling Summary:
- Leasehold Land: Exempt from GST if covered under Notification No. 12/2017; otherwise, taxable at 18%.
- Freehold Land: Sale of land is not taxable.
- Annual Lease Rent: Taxable at 18%.
- GST Rate: 18% for leasing services unless exempted.
- ITC Claim: Not permissible for RSCCL on inward goods or services.