2018 (4) TMI 461 - HC - GST

Levy of GST on the one-time lease premium - letting plots of land on lease basis - long term lease - The members of the association were allotted plots. Under the scheme, the tenderer/bidder is required to make an offer by quoting a rate per square meter on account of payment of lease premium. The plots are to be allotted on long term lease of 60 years. - It is argued that, a long term lease of 60 years tantamounts to sale of the immovable property, since the lessor is deprived of, by the allotment the right to use, enjoy and possess the property. Our attention is invited to section 105 of the Transfer of Property Act, 1882. Held that - if one refers to Schedule II, section 7, then, Item No. 2 styled as land and building and any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential complex for business, either wholly or partly is a supply of service. It is settled law that such provisions in a taxing statute would have to be read together and harmoniously in order to understand the nature of the levy, the object and purpose of its imposition. No activity of the nature mentioned in the inclusive provision can thus be left out of the net of the tax. Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered. We cannot then probe into the legislation any further. The demand for payment of GST is in accordance with law. The said demand cannot be said to be vitiated by any error of law apparent on the face of the record. In these circumstances, we do not find any merit in the writ petition. - Decided in favor of revenue.

Issues Involved:
1. Levy and collection of Goods and Services Tax (GST) on one-time lease premium.
2. Nature of the transaction and its classification under GST.
3. Legal status and functions of CIDCO.
4. Applicability of previous judicial precedents and statutory provisions.

Detailed Analysis:

1. Levy and Collection of GST on One-time Lease Premium:
The petitioners challenged the order levying GST on the one-time lease premium charged by CIDCO for leasing plots of land. They sought a writ of mandamus directing the respondents not to collect GST on the long-term lease granted by CIDCO.

2. Nature of the Transaction and Its Classification Under GST:
The petitioners argued that a long-term lease of 60 years is akin to the sale of immovable property, as it deprives the lessor of the right to use, enjoy, and possess the property. They cited Section 105 of the Transfer of Property Act, 1882, and argued that the one-time premium is a lump sum consideration for entering into the lease. The petitioners contended that such a transaction should be treated as a conveyance under Article 36, Schedule I of the Maharashtra Stamp Act, 1958, and thus not subject to GST.

The respondents, however, argued that the transaction is a supply of services under the GST Act. They pointed out that the definition of "supply" in Section 7 of the GST Act includes lease transactions for consideration. The court agreed with the respondents, stating that the GST Act's provisions clearly include lease transactions as taxable supplies. The court emphasized that the one-time premium is a consideration for leasing the land, making it subject to GST.

3. Legal Status and Functions of CIDCO:
The petitioners highlighted that CIDCO is a statutory authority performing governmental functions and duties under the Maharashtra Regional and Town Planning Act, 1966. They argued that CIDCO's activities should not be subject to GST as they are not business activities but statutory obligations.

The court, however, noted that CIDCO, despite being a statutory authority, engages in activities that fall within the definition of "business" under the GST Act. The court referred to Section 2(17) of the GST Act, which includes activities undertaken by governmental authorities as public authorities. The court concluded that CIDCO's leasing of land for consideration is a business activity subject to GST.

4. Applicability of Previous Judicial Precedents and Statutory Provisions:
The petitioners relied on various judgments, including the Supreme Court's decisions in Commissioner of Income Tax Assam, Tripura and Manipur vs. Panbari Tea Co. Ltd. and R. K. Palshikar (HUF) vs. Commissioner of Income Tax, to argue that the one-time lease premium should be treated as a capital receipt and not subject to GST. They also cited a previous order of the Bombay High Court in Commissioner of Central Excise, Nashik vs. Maharashtra Industrial Development Corporation.

The court distinguished these cases, stating that they were decided in the context of income tax and not GST. The court emphasized that the GST Act has its own definitions and provisions, which should not be conflated with those of other tax laws. The court also referred to the Allahabad High Court's judgment in Greater Noida Industrial Dev. Authority vs. Commissioner of Customs, Central Excise, which upheld the levy of service tax on similar transactions.

Conclusion:
The court concluded that the demand for GST on the one-time lease premium is in accordance with the law. The transaction is a supply of services under the GST Act, and CIDCO's status as a statutory authority does not exempt it from GST. The court dismissed the petition, stating that the demand for GST is neither unfair nor unjust.

Final Judgment:
The writ petition was dismissed, and the rule was discharged. The demand for payment of GST on the one-time lease premium was upheld as lawful, with no order as to costs.

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