2019 (2) TMI 1002 - AAR - GST

Levy of GST - Classification of supply - construction and guaranteed lease - Private Entrepreneurs Godowns built under the PEG-2008 scheme of the FCI and leased out to the Nodal Agency (UPSWC) on Lease and services basis for the storage of FCl s food grain stocks (Wheat) - Mixed Supply - Held that - Under the scheme for construction of godowns for FCl-storage requirement through private entrepreneurs2008 (known as PEG-2008 scheme), the Haryana State Co-operative Supply and Marketing Federation Ltd. (Hafed) was notified as Nodal Agency for construction of godowns in the State of Haryana - The Haryana State Cooperative Supply and Marketing Federation Ltd. (HAFED) was notified as nodal agency for construction of godowns in the State of Haryana under the said PEG-2008 Scheme of the Central Government/ FCI. In case of Lease only basis, godowns have been built by the Private Investor and have been leased out to the Nodal Agency which manages storage, preservation and warehousing of the stocks of the FCI stored therein - In case of Lease and Services basis, godowns have been built by the Private Investor and have been leased out to the Nodal Agency and the storage, preservation and warehousing of the stocks of the FCI stored therein is managed by the Private Investor under the supervision of the Nodal Agency. The applicant s case, as per its agreement with the Nodal Agency, falls under the PEG scheme of Lease and services basis type. As per the scheme of classification of services appended to notification no. 11/2017-Central Tax (Rate), dated 28.06.2017 and its corresponding State tax notification no. 46/ST-2, dated 30.06.2017 the service code 997212 is for renting or leasing services involving own or leased non-residential property. Such services attract 18% GST as per Sr. no. 16 of notification no. 11/2017-Central Tax (Rate), dated 28.06.2017 and its corresponding State tax notification no. 46/ST-2, dated 30.06.2017 - Since, as per the copy of contract/agreement with Hafed, the applicant is providing both the services, i.e., the support services in relation to agricultural produce as well as Real Estate Services in terms of SAC 997212, and since both these services are capable of being provided independent of each other, these cannot be understood to be naturally bundled and supplied conjointly in the ordinary course of business. Therefore, the applicant has/is providing Mixed Supply as per section 2 (74) of the CGST/HGST Act, 2017 and attract tax rate of that particular supply which attracts the highest rate of tax in terms of section 8 (b) of the Act ibid.

Summary

Issues Involved:
1. Applicability of GST on leasing of godowns under the PEG-2008 scheme.
2. Classification of services provided under the PEG-2008 scheme.
3. Nature of services provided (whether mixed supply).
4. Tax rate applicable to the services provided.

Issue-wise Detailed Analysis:

1. Applicability of GST on leasing of godowns under the PEG-2008 scheme:
The applicant sought an advance ruling on whether GST is exempt or applicable on the Private Entrepreneurs Godowns built under the PEG-2008 scheme of the FCI and leased out to the Nodal Agency (UPSWC) on 'Lease and services basis' for the storage of FCI's food grain stocks (Wheat). The Deputy Excise & Taxation Commissioner, Sirsa, clarified that renting/leasing of immovable property is a supply of services under section 7 of the HGST Act, 2017, and thus taxable. The applicant argued that under the Service Tax regime, they were reimbursed for service tax by FCI/HAFED, and they believe the nature of taxation remains unchanged under the GST regime.

2. Classification of services provided under the PEG-2008 scheme:
The services provided by the applicant fall under two categories: 'Lease only basis' and 'Lease and Services basis.' The present case falls under the 'Lease and Services basis,' where the private investor manages storage, preservation, and warehousing of the stocks under the supervision of the Nodal Agency. The applicant referred to a letter from FCI clarifying that agreements under 'Lease with Services Basis' are considered 'Storage and Warehousing Services,' which are exempt from GST.

3. Nature of services provided (whether mixed supply):
The authority examined whether the services provided by the applicant constitute a 'Mixed Supply' under section 2 (74) of the CGST/HGST Act, 2017. The applicant provides both support services in relation to agricultural produce and Real Estate Services (leasing of immovable property). Since these services can be provided independently and are not naturally bundled, they are treated as 'Mixed Supply,' attracting the highest rate of tax applicable to any one of the supplies.

4. Tax rate applicable to the services provided:
The relevant notifications and service codes were analyzed to determine the applicable tax rate. The service code 997212 for renting or leasing services involving non-residential property attracts 18% GST. Since the applicant's services are classified as 'Mixed Supply,' they attract the highest applicable tax rate, which is 18% (9% CGST + 9% HGST).

Ruling:
The authority ruled that the services provided by the applicant, i.e., leasing of immovable property and support services in relation to agricultural produce, are in the nature of 'Mixed Supply' as per section 2 (74) of the CGST/HGST Act, 2017. Consequently, these services attract a tax rate of 18% (9% CGST + 9% HGST) as applicable to SAC 997212. The ruling was ordered to be communicated accordingly.