2020 (7) TMI 353 - AAR - GST

Exemption from GST - Lease Agreement between the Applicant Company i.e. the Lessee and RLDA for a period of 99 years - Amount transferred by the Applicant Company as Security Deposit in pursuance to the tender and lease agreement - amount deposited during February, 2019 - Applicability of N/N. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017 - HELD THAT - The elements regarding long term lease (present lease is 99 years) and entity having 20% or more of ownership of Central Government are satisfied (RLDA being the statutory body of Government of India) - but the two other conditions namely, industrial plots or plots for development of infrastructure for financial business and that to award such lease to developers in any financial business area needs examination. RLDA is not awarding industrial plots to applicant but a portion of land over which some residential infrastructures are meant to be built. An industrial plot is the one in which developer is granted permission by competent authority be it Central Government/ State Government in reference to some scheme of development. These plots are for a specific purpose and if plot-holders in future tries to engage in some other work or lease conditions of agreement are breached, then the developer has every right to eject that plot-holder. In the present case, RLDA is just providing a parcel of land which is in its ownership therefore; the lease of the same cannot be categorized as meeting condition of industrial plot and for the purpose of financial business. RLDA has leased ordinary plots for residential purpose consequently the conditions of the said notification are not satisfied. Therefore, the said notification is not applicable in the instant case. Thus, The Lease Agreement between the Applicant Company i.e. the Lessee and RLDA for a period of 99 years is not exempted from levy of GST in view of the Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017 - the amount of ₹ 158657105/- which is transferred by the Applicant/SPV in pursuance to the tender and lease agreement dated 08.11.2019 is not exempted under GST in view of the Notification No. 04/2019-Central tax(rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax(rate) dated 28.06.2017 - amount of ₹ 158657105/- deposited during February, 2019 is not exempted from GST vide Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017.

Summary

Issues Involved:
1. Whether the lease agreement between the applicant company and RLDA for 99 years is exempt from GST.
2. Whether the amount of ?158,657,105 transferred as a security deposit is exempt from GST.
3. Whether the amount of ?158,657,105 deposited in February 2019 is exempt from GST.

Detailed Analysis:

Issue 1: Lease Agreement Exemption from GST
The applicant entered into a lease agreement with RLDA for 99 years for residential and commercial development. The applicant contended that the lease agreement is exempt from GST under Notification No. 04/2019-Central Tax (Rate) dated 29.03.2019 and Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. However, the authority found that RLDA, being a statutory authority, provides rental or leasing services involving own land, classifiable under HSN 9972, attracting GST @ 18%. The lease agreement does not fulfill the conditions for exemption under the cited notifications, as RLDA leased ordinary plots for residential purposes, not industrial plots or plots for financial business development. Therefore, the lease agreement is not exempt from GST.

Issue 2: Security Deposit Exemption from GST
The applicant argued that the amount of ?158,657,105 transferred as a security deposit is exempt from GST. However, the authority concluded that this amount is not a security deposit but the first installment of the lease premium, as per the lease agreement and the financial bid. The lease premium is a consideration for leasing services supplied by RLDA, and thus, it is liable to GST. The authority emphasized that the payment of the lease premium was made after the issuance of the Letter of Acceptance (LoA) and the deposit of the bid security amount. Consequently, the amount transferred as the first installment of the lease premium is not exempt from GST.

Issue 3: Exemption for Amount Deposited in February 2019
The applicant contended that the amount deposited in February 2019 should be exempt under Notification No. 04/2019-Central Tax (Rate) dated 29.03.2019. However, the authority found that the notification applies to upfront amounts payable on or after 01.04.2019, whereas the amount in question was deposited in February 2019. Additionally, the "Time of Supply of Services" under Section 13(3) of the CGST Act, 2017, indicates that the GST liability and point of taxation are applicable in February 2019. Therefore, the amount deposited in February 2019 is not exempt from GST under the cited notification.

Conclusion:
The authority ruled that:
1. The lease agreement for 99 years is not exempt from GST.
2. The amount of ?158,657,105 transferred as a security deposit is not exempt from GST.
3. The amount of ?158,657,105 deposited in February 2019 is not exempt from GST.