2021 (11) TMI 1199 - AAAR - GST

Rectification of mistake - error apparent on the face of the record - levy of GST - one-time concession fee for a long-term lease - applicability of Section 142 of the GST Act, 2017 - HELD THAT - It is evident that, the concession period was to commence from the Appointed Date and Appointed Date shall be deemed to occur only when each and every Condition Precedent is either satisfied or waived. The second installment of upfront concession Fee along with applicable taxes, was credited in ledger of the 'Applicant on 16.01.2018. Hence, the condition precedent to pay Upfront Concession Fee with applicable taxes was fulfilled only on 16.01.2018. The Applicant has not submitted any document to show that other conditions precedent have not been fulfilled, hence, it is presumed that they are fulfilled. Thus, Appointed Date shall be deemed to occur on 16.01.2018. Accordingly, the concession period commenced from 16.01.2018 although the agreement was executed on 9.12.2016. The GST Act, 2017 came into effect on 01.07.2017. Hence, the provisions of GST Act, 2017, would apply as the GST Act, 2017, came into force prior to the commencement of the concession period. In the instant case, the Upfront Concession Fee is a consideration received by the Applicant for provision of service and it fits into the definition of 'consideration' as envisaged under sub-section 31 of Section 2 of the GST Act, 2017. The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of Section 13 of GST Act 2017. It is evident that, if tax was leviable on services under Chapter V of the Finance Act, 1994 (32 of 1994), then no tax shall be payable under the GST Act - in the instant case the provisions of Section 142 (11) (b) would not apply as the concesssion period commenced from 16.01.2018 although the agreement was executed on 9.12.2016. In the instant case, the subject transaction of the Applicant does not fulfill the requirements of exemption Notification No. 41/2016-S.T dated 22.9.2016 and hence was not eligible for the benefit of Notification No. 41/2016-S.T dated 22.9.2016. There was no error apparent on the face of record in the Order dated 22.03.2019, passed by the Appellate Authority - the rectification application is rejected.

Summary

Issues Involved:
1. Applicability of GST on one-time concession fee for a long-term lease.
2. Eligibility for exemption under Notification No. 12/2017-Central Tax (Rate) as amended by Notification No. 32/2017-Central Tax (Rate).
3. Application of Section 142(10) vs. Section 142(11)(b) of the GST Act, 2017.
4. Rectification of the Appellate Authority's order due to alleged errors.

Issue-wise Detailed Analysis:

1. Applicability of GST on One-time Concession Fee:
The Applicant, registered under the GST Act, sought an Advance Ruling on whether GST is applicable on a one-time concession fee charged for a 60-year lease of property for infrastructure development. The Authority for Advance Ruling (AAR) held that the service provided did not satisfy the criteria for exemption under Sr. No. 41 of Notification No. 12/2017-Central Tax (Rate), as amended, and thus, the long-term lease was liable for GST. The Appellate Authority for Advance Ruling (AAAR) upheld this decision, confirming the applicability of GST on the concession fee.

2. Eligibility for Exemption under Notification No. 12/2017-Central Tax (Rate):
The Applicant claimed exemption under Sr. No. 41 of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 32/2017-Central Tax (Rate). The AAR and AAAR examined the conditions of the notification and concluded that the service provided by the Applicant did not meet the exemption criteria. The AAAR detailed that the notification applies to long-term leases of industrial plots provided by government entities or those with significant government ownership, which was not the case here.

3. Application of Section 142(10) vs. Section 142(11)(b) of the GST Act, 2017:
The Applicant argued that the GST Act should not apply as the agreement was executed before the GST regime. They contended that Section 142(10) was misapplied and that Section 142(11)(b) should have been invoked, which exempts services taxable under the Finance Act, 1994, from GST. However, the AAAR found that the concession period commenced after the GST Act came into effect, making the provisions of Section 142(10) applicable. The AAAR clarified that Section 142(10) applies to services supplied after the GST's appointed day, even if the contract was entered into earlier. The AAAR also noted that Section 142(11)(b) did not apply as the service was not taxable under the Finance Act, 1994.

4. Rectification of the Appellate Authority's Order:
The Applicant sought rectification of the AAAR's order, claiming an error apparent on the face of the record. They argued that the point of taxation was the pre-GST agreement execution and that the AAAR misapplied Section 142(10). The AAAR reviewed the submissions and documents, including the concession agreement and invoices, and found no error in the original order. The AAAR emphasized that the concession period commenced post-GST implementation, validating the application of GST. The AAAR also noted the Applicant's contradictory submissions regarding the applicability of GST notifications and the Finance Act, 1994.

Conclusion:
The AAAR concluded that the order dated 22.03.2019 was consistent with the extant statute and required no rectification. The rectification application was rejected, affirming the applicability of GST on the one-time concession fee and the ineligibility for exemption under the cited notifications.