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2019 (7) TMI 814 - AAR - GSTLevy of GST - 99 years Lease agreement of a private property - Whether the Lease Agreement between the Applicant Company i.e. the lessor and the Lessee for a period of 99 years is a Sale of immovable property and outside GST and is exempt from levy of GST? - HELD THAT - The agreement made between the applicant and the lessee for long term of 99 years is for lease agreement with many restrictions and has no right to further sale the allotted plot. In the sale deed purchaser becomes the absolute owner of the plot and is not dependent on the lessor for renewal or extension of the lease period - the stamp duty charged by the Registration and Stamp department of the state govt. varies from one state to another. Rate of tax - If the present transaction of giving land on lease of 99 years is taxable under GST then at what rate and what HSN Code is applicable? - HELD THAT - Leasing of a private property (land building etc.) are classifiable under HSN 997212 heading Rental or leasing services involving own or leased non-residential property attracting GST @18% (SGST 9% CGST 9%) of Annexure to Notification No. 11/2017 dated 28.06.2017.
Issues Involved:
1. Whether the Lease Agreement between the Applicant Company and the Lessee for 99 years is a Sale of immovable property and outside GST and is exempt from levy of GST. 2. If the present transaction of giving land on lease of 99 years is taxable under GST, then at what rate and what HSN Code is applicable. Detailed Analysis: Issue 1: Lease Agreement as Sale of Immovable Property and GST Exemption - Applicant's Submission: The applicant, a special purpose vehicle set up under the 'Mega Food Park Scheme, 2012' by the Ministry of Foods Processing Industries (MoFPI), entered into lease agreements for 99 years for industrial units at Greentech Mega Food Park. The applicant argued that such long-term leases should be considered as sales of immovable property and thus exempt from GST. - Jurisdictional Officer's Comments: The officer contended that leasing land for a consideration constitutes a supply of service under Section 7 of the GST Act. Schedule II specifies that any lease, tenancy, or license to occupy land is a supply of services. The officer also cited the Builders Association of India vs UOI case, where the Bombay High Court upheld GST on long-term leases of plots for 60 years. - Findings and Analysis: - Legal Definition: The term "Supply" under Section 7 of the GST Act includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for consideration in the course of business. - Schedule II: Specifies that any lease or letting out of a building for business purposes is a supply of services. - Lease Agreement: The lease agreement clearly indicates a lease with many restrictions, not a sale. The lessee cannot transfer or sub-lease without prior consent and is bound by the covenants of the lease. - Stamp Duty: The stamp duty paid for the lease agreement does not change its nature from lease to sale. - Conclusion: The lease agreement for 99 years is not a sale of immovable property but a supply of service under GST. Issue 2: Taxability, Rate, and HSN Code for 99-Year Lease - Applicant's Submission: The applicant sought clarification on the taxability and applicable HSN code if the transaction is considered taxable under GST. - Jurisdictional Officer's Comments: The officer pointed out that leasing services involving non-residential property fall under HSN 997212, attracting GST at 18% (SGST 9% + CGST 9%). - Findings and Analysis: - Classification: Leasing of private property (land, building, etc.) is classifiable under HSN 997212, "Rental or leasing services involving own or leased non-residential property." - GST Rate: As per Notification No. 11/2017 dated 28.06.2017, such services attract GST at 18% (SGST 9% + CGST 9%). - Conclusion: The lease agreement for 99 years is classifiable under HSN 9972 and attracts GST at 18%. Ruling: The Lease Agreement between the Applicant and the Lessee for a period of 99 years is a Lease Agreement of immovable property classifiable under HSN 9972 and attracts GST at 18% (SGST 9% + CGST 9%).
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