2021 (12) TMI 163 - AAR - GST

Seeking clarification on the imposition of the GST on the land premium to be payable to the RIADA - applicability of serial No. 41 of notification 12/2017 under heading 9972 of GST issued by the central government on the payment of upfront lease premium on future installments - HELD THAT - In the present case (i) the lease is for 30 years, (ii) The lessor i.e. RIADA is a corporation established by the State Government but the premium paid for the lease in 10 equal instalment over a period of 5 years. After paying the first instalment as upfront the applicant has received the service i.e. the industrial land/shed for the period of 30 years from the date of allotment. Since the applicant has admitted himself that the word upfront means beforehand or before the actual evident is due , the so called premium paid in instalment after the allotment does not qualify the criteria of upfront amount.

Summary

Issues:
1. Imposition of GST on land premium payable to RIADA.
2. Applicability of serial No. 41 of notification 12/2017 on upfront lease premium.

Analysis:

Issue 1: Imposition of GST on Land Premium
The applicant, a company engaged in manufacturing and exporting garments, sought clarification on the GST imposition on the land premium payable to RIADA for setting up an industrial unit. The applicant argued that the lease premium paid in 10 installments over 5 years qualifies for exemption under serial No. 41 of notification 12/2017, as it meets the conditions of being an upfront amount, for a lease of 30 years or more, provided by a state government industrial corporation. However, the ruling authority found that the premium paid in installments after allotment does not meet the criteria of an upfront payment, as defined by the notification. Therefore, the authority ruled that the instalment payments do not qualify for GST exemption under the notification.

Issue 2: Applicability of Notification 12/2017
The applicant also sought clarity on the applicability of serial No. 41 of notification 12/2017 regarding the payment of upfront lease premium on future installments. The ruling authority analyzed the provisions of the notification, which exempted the one-time upfront amount for long-term industrial plot leases from GST. The authority emphasized that for the exemption to apply, the premium must be paid upfront, the lease must be for 30 years or more, and the lessor must be a state government or an industrial corporation. As the premium in this case was paid in installments over 5 years after allotment, it did not meet the criteria of an upfront payment, leading to the conclusion that the exemption under the notification did not apply.

In conclusion, the ruling clarified that the instalment payments made to RIADA for the lease of industrial land/shed did not qualify as upfront payments and, therefore, were not exempted from GST under serial No. 41 of notification 12/2017.