2020 (10) TMI 806 - AAR - GST

Scoep of Advance Ruling application - Exempt from GST or not - upfront lease amount paid to M/s. RLDA for the development of Multi-functional complex (Operational building) at Erode railway Junction for Long term lease for 45 years - HELD THAT - It is evident that advance ruling are decisions on questions specified in sub-section 97 (2) of the Act in relation to the supply of goods or services undertaken or proposed to be undertaken by the applicant seeking the same. Hence, supplies undertaken or proposed to be undertaken by the applicant alone are covered under the advance ruling as per Section 95(a) of the Act. In the instant case the applicant is not making the supply but RLDA. Accordingly, the application is not admitted and rejected without going into merits. The applicant has also contented that one of the questions permitted as per Section 97 (2) on admissibility of Input Tax Credit means that the recipient can seek a ruling on the admissibility of ITC for the supply - Section 95(a) by definition advance ruling has specified that the applicant can only be seek a ruling about the supplies undertaken or proposed to be undertaken by the applicant i.e. the applicant is the supplier in the supply in question. Accordingly, all the question the applicant can ask as specified in Section 97 pertain only to him. Specifically, Section 97 (2) (d) pertains to the admissibility of Input Tax Credit of tax paid of deemed to have been paid by the applicant (i.e. applicant as per the Act). This question would deal with the admissibility of ITC on all the inputs/input services/ capital goods etc. used by the applicant (i.e. applicant as per the Act) to make or propose to make the supply in question. Therefore, the question does not pertain to the recipient of the supply in question as contended by M/s Erode Infrastructures nor is there any dichotomy in stating that that as per the Act recipient of the supply in question cannot seek advance ruling under the Act. Accordingly, the application is not admitted and rejected without going into merits. Application dismissed being not admitted.

Summary

Issues Involved:
1. Whether the upfront lease amount paid to RLDA for the development of a Multi-functional complex at Erode Railway Junction for a long-term lease of 45 years is exempt under GST.
2. Applicability of advance ruling to the recipient of services under the CGST Act 2017 and TNGST Act 2017.
3. Admissibility of Input Tax Credit (ITC) for the recipient of services.

Detailed Analysis:

1. GST Exemption on Upfront Lease Amount:
The applicant, M/s. Erode Infrastructures Private Limited, sought an advance ruling on whether the upfront lease amount paid to RLDA for the development of a Multi-functional complex at Erode Railway Junction for a long-term lease of 45 years is exempt under GST. The applicant argued that as per various notifications, including Notification No. 12/2017 - Central Tax (Rate) and subsequent amendments, GST is exempted on one-time upfront amounts for long-term leases of 30 years or more for government infrastructure projects.

2. Applicability of Advance Ruling to the Recipient of Services:
The applicant contended that they are eligible to seek an advance ruling as they are the recipient of services from RLDA. They argued that the term "supply of goods or services" in Section 95(a) of the CGST Act 2017 includes both inward and outward supplies. They further claimed that as per Section 97 (2) (d) of the CGST Act 2017, they could ask questions related to the admissibility of ITC, which pertains to inward supplies.

The Authority examined the lease agreement and noted that RLDA is the supplier of the leasing service, while the applicant is the recipient. The Authority clarified that as per Section 95(a), advance rulings are decisions on questions related to the supply of goods or services undertaken or proposed to be undertaken by the applicant. Since the applicant is not the supplier in this transaction, the application for an advance ruling was not admitted.

3. Admissibility of Input Tax Credit (ITC) for the Recipient of Services:
The applicant argued that they could seek a ruling on the admissibility of ITC for the tax paid on the upfront lease amount. However, the Authority clarified that Section 97 (2) (d) pertains to the admissibility of ITC for the supplies undertaken or proposed to be undertaken by the applicant as a supplier. Since the applicant is the recipient and not the supplier in this transaction, they cannot seek an advance ruling on this matter.

Ruling:
The Authority for Advance Ruling ruled that the application for advance ruling filed by the applicant is not admitted under Sub-section (2) of Section 98 of the CGST Act 2017 and the TNGST Act 2017. The supply based on the lease agreement between the applicant and RLDA, for which the applicability of the notification is sought, is not undertaken or proposed to be undertaken by the applicant.