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2021 (10) TMI 368 - AAR - GSTLevy of GST - Supply or not - leasing services - contribution paid/payable by the members towards Development Cost of the Bourse for the promotion of Exports of Gem and Jewellery - exemption under Entry No.41(Heading 9972) of Notification No.12/2017Central Tax(Rate) dated 28-6-2017 or not - liability of interest if the liability to pay tax shall accrue with retrospective effect from 1st July, 2017 - HELD THAT - On careful reading of the copies of the two deeds entered between GHB and GIDC, it is forthcoming that the deeds pertain to leasing of subject plots by GIDC to GHB for a period of 99 years and it is not sale of land. GHB s contention that it has paid stamp duty on lease deed does not change the scope of supply of service into sale of land. The supply is Leasing services in present case. The procedure of registration of purchase of land and applicable stamp duties is different from the procedure of lease of land. Further, it is noted that GHB is aware of this fact that subject activity is leasing service because GHB itself argues for the applicability of entry 41 to said Notification, wherein the description of services is long term leasing of plots for thirty years or more. Subject entry 41 to said Notification provides exemption for providing said services by GIDC to GHB (developer). In this regard, there are no merit in the contention of GHB, that GIDC has supplied services to industrial units, such as M/s. P. Hirani Exports LLP and M/s. Sonani Jewels Pvt. Ltd. for it is on record that GIDC has provided subject services to GHB and not to industrial units. It is also on record that GHB has supplied subject leasing services to industrial units such as M/s. P. Hirani Exports LLP and M/s. Sonani Jewels Pvt. Ltd. Now that GHB is not a State Government Industrial Development Corporations or Undertakings, also that GHB is not having 50 per cent. or more ownership of Central Government, State Government, Union territory, there are no merit to extend the scope of exemption granted vide Entry No. 41 to the said Notification to consideration received by GHB. GHB acquired the lease of the plot from GIDC at the cost of ₹ 225 per Sqm whereas GHB leased the plot to the members, such as, M/s. P. Hirani Exports at the cost of ₹ 2712.83 per Sqm and to M/s. Soni Jewels at ₹ 11960 per Sqm. It is on record that this amount recovered by GHB from its members is not in the nature of reimbursement of charges of the amount which GHB paid to GIDC as GHB has recovered the charges from its applicants/members over and above the rate which it paid to GIDC. Thus there are no merit to entertain the entry 77 of said Notification to GHB. The competent authority, has laid down this path to exemption vide said entry 77 to said Notification to GHB in this regard, which has not been satisfied by GHB. Liability of interest - HELD THAT - There are no explicit mention in the statutory provisions that Question on interest applicability may be raised before the Authority. However, the authority do not want to pass a Ruling without a comment on this issue. The liability to interest is automatic and arises by the operation of the statutory and mandatory provisions of the law. The interest liability is a statutory liability which accrues automatically.
Issues Involved:
1. Whether the contribution paid by members towards Development Cost of the Bourse amounts to supply liable to GST. 2. Whether the contribution by members towards Development Cost of Bourse for promotion of Exports of Gem and Jewellery is exempt under Entry No.41 of Notification No.12/2017-Central Tax(Rate). 3. Whether interest is payable on accrued tax liability from 1st July 2017 to the date of notification of the amendment to Section 7(1) of the CGST Act, 2017. Issue-wise Detailed Analysis: 1. Contribution towards Development Cost as Supply Liable to GST: The Authority examined the definition of "supply" under Section 7 of the CGST Act, which includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for consideration in the course or furtherance of business. It was found that GHB's activity of leasing plots to its members falls within this definition. Additionally, the inclusive definition of "business" under Section 2(17) of the CGST Act encompasses any trade, commerce, or provision of facilities or benefits to its members for consideration. Consequently, the contributions paid by members towards the development cost of the Bourse are considered as supply liable to GST. 2. Exemption under Entry No.41 of Notification No.12/2017-Central Tax(Rate): The Authority analyzed Entry No.41, which exempts upfront amounts payable for long-term leases of industrial plots provided by State Government Industrial Development Corporations or Undertakings, or entities with 50% or more ownership by the Central or State Government. It was found that GIDC's leasing of plots to GHB qualifies for this exemption. However, GHB's subsequent leasing to its members does not qualify as GHB is not a State Government Industrial Development Corporation or an entity with the requisite government ownership. Therefore, the contributions paid to GHB by its members are not exempt under this entry. 3. Interest on Accrued Tax Liability: The Authority noted that the liability to pay interest on accrued tax is automatic and arises by operation of law. Although the question of interest applicability is not explicitly mentioned under Section 97(2) of the CGST Act, the Authority clarified that statutory interest is payable from 1st July 2017, as the liability to GST arises from this date due to the amendment to Section 7(1) of the CGST Act. Findings: - GHB's activity of leasing plots to its members is a supply of service liable to GST. - The consideration paid to GHB by its members is not exempt under Entry No.41 of Notification No.12/2017-Central Tax(Rate). - Statutory interest on the accrued tax liability is payable from 1st July 2017. Ruling: a. The contributions paid by industrial units to GHB are liable to GST as they constitute a supply of service. b. The contributions are not exempt under Entry No.41 of Notification No.12/2017-Central Tax(Rate). c. Liability to GST arises from 1st July 2017, and statutory interest is payable on the accrued tax liability.
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