2018 (11) TMI 1347 - AAR - GST

Levy of GST - One time concession fees charged by the appellant in respect of their property at Anjuna, Goa which is given to M/s. Myrayash Hotels Pvt. Ltd. for a long term lease of 60 years for development of infrastructure for financial business on Private Investment mode on DBFOT basis providing exclusive right, license and authority to construct, operate and maintain the project. Ruling - The service provided by the applicant in the instant matter, is not falling under the criterion mentioned at Sr. No. 41 of the Notification No. 12/2017-Centra1 Tax (Rate), dated 28.06.2017 as amended by the Notification No. 32/2017-Centra1 Tax (Rate), dated 13.10.2017. Therefore, the applicant is not entitled for the benefits of the said notification and the activity of long term lease is liable for levy of GST.

Summary

Issues:
Whether GST is applicable on One Time Concession Fees Charged by the applicant for a long term lease of 60 years for development of infrastructure for financial business.
Whether the conditions for exemption under Entry No. 41 of Notification No. 12/2017-C.T. (Rate) are satisfied.
Applicability of GST on long term lease agreements.
Interpretation of Section 142(10) of the GST Act regarding the liability to tax under the provisions of the Act.

Analysis:
The applicant sought an Advance Ruling on the applicability of GST on a one-time concession fee charged for a 60-year lease for infrastructure development. The applicant claimed exemption under Entry No. 41 of Notification No. 12/2017-C.T. (Rate), citing conditions met such as upfront payment, lease duration, industrial plot use, and lessor being a State Government undertaking. However, the Authority found no declaration of the leased area as an industrial/financial business area, rendering the exemption inapplicable.

The Authority referenced a High Court case where lease premium was subject to GST, indicating that consideration for services is taxable. Another High Court decision on renting services concluded that service tax could be levied. Regarding Section 142(10) of the GST Act, the Authority clarified that continuous supply of service post-GST introduction is taxable, even if the contract was made pre-GST, as in this case where services are to be provided for 60 years.

Ultimately, the Authority ruled that the applicant's service did not meet the criteria for exemption under Entry No. 41, making the long-term lease subject to GST. The decision highlighted the importance of compliance with specific conditions for exemption and the applicability of GST on continuous supply of services post-GST implementation.