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2023 (11) TMI 869 - AAR - GSTLiability of pay GST - lease renewal amount payable to SMC - premium on lease renewal amount payable to SMC - Reverse Charge Mechanism u/s 9(3) or 9(4) of CGST Act - collection made from shareholders/shop owners for making payment of lease and lease premium amounts be considered as supply or not - applicability of GST under forward charge - effect of circular no. 101/20/2019-GST dated 30.4.2019 - reimbursement of lease and lease premium amount get ITC of the GST charged by the applicant. Whether the applicant is liable to pay tax under Reverse Charge Mechanism RCM u/s 9(3) or 9(4) on lease renewal, payable to SMC? - HELD THAT - Section 9(3) of the CGST Act, 2017 empowers the Government to issue notification, on the recommendations of the GST Council, specifying categories of supply of goods or services or both wherein tax shall be paid on RCM basis by the recipient,. Section 9(4), ibid, on the other hand, empowers Government to issue a notification to specify a class of registered persons who shall in respect of supply of specified categories of goods or services or both received from an unregistered supplier , pay tax on RCM basis - Hence, lease of land is to be treated as a supply of services chargeable to GST. In terms of Sr. No. 5 of notification No. 13/2017-CT(Rate) dated 28.6.2017, as amended, the applicant, who as a recipient falls within the ambit of a business entity , in terms of the definition of business as per 2(17), ibid , becomes liable to discharge GST under RCM in terms of section 9(3) of the CGST Act, 2017 in respect of the services supplied by SMC, a local authority in terms of Section 2(69), ibid . Whether they are liable to pay GST under Reverse Charge Mechanism u/s 9(3) or 9(4) for premium on lease renewal amount payable to SMC? - whether circular No. 101/20/2019-GS 1 did 30.4.2019 grants them exemption from payment of GST? - HELD THAT - In terms of Schedule II of GST Act, 2017, the activity i.e. lease of plot and payment of one time lease premium/salami/premium on lease renewal and annual premium paid by the applicant is a supply and is covered under Section 7(1) of CGST Act, 2017 - In this case the service provider is not State Government Industrial Development Corporation or Undertakings or any other entity having 50% or more ownership of Central Government, State Government, Union Territory but a local authority i.e. Surat Municipal Corporation. Further, the said Notification or GST Act, 2017, does not define the industrial or financial business area . For considering any area as industrial or financial business area, it is necessary that the area must be declared as industrial or financial business area by the state government by notification. In the instant matter, no such Notification declaring the area consisting of Sural Municipal Corporation proposed to be leased out to the applicant, as industrial/financial business area, is on record. Therefore, the area cannot be treated as industrial or financial business area in absence of any evidence in support. Thus, the benefits of Sr. no. 41 of not. No. 12/2017-CT(Rate), as amended is not available to the applicant. Thus, One-time premium/salami/premium on lease renewal and annual lease premium paid by the applicant to the AUDA for leasing of Surat Textile Market is covered under supply of service in terms of Section 7(1) of CGST Act, 2017. Accordingly, the said One-time premium/salami/ premium on lease renewal and annual lease premium paid by the applicant to Surat Municipal Corporation are taxable under GST in terms of the Notification No. 11/2017-CT (Rate) dated 28.06.2017. Whether the applicant is liable to pay GST under RCM under Section 9(3) of CGST Act, 2017? - HELD THAT - In terms of Sr. No. 5 of notification No. 13/2017-CT(Rate) dated 28.6.2017, as amended, the applicant, who as a recipient falls within the ambit of a business entity , in terms of the definition of business as per 2(17), ibid , becomes liable to discharge GST under RCM in terms of section 9(3) of the CGST Act, 2017 in respect of the services supplied by SMC, a local authority in terms of Section 2(69), ibid . Whether collection made from shareholders/shop owners for making payment of lease and lease premium amounts be considered as supply and whether GST under forward charge is applicable on it? - HELD THAT - The collection made from shareholders/shop owners, who are members of the cooperative society, by the applicant, for making payment of lease and lease premium, is a supply under section 7 of the CGST Act, 2017 and would be leviable to GST under forward charge. Whether the collection made from shareholders/shop owners by the applicant if held leviable to GST, then can the applicant s shareholder/shop owners who are reimbursing the lease and premium on lease renewal be eligible for ITC of the GST charged by the applicant? - HELD THAT - A conjoint reading of the sections 95(a) and (c), 97 and 103 of the CGST Act, 2017, depicts that advance ruling means a decision by the AAR to an applicant on matters or on questions specified under 97(2) ibid in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant; that an applicant, means any person registered or desirous of obtaining registration under this Act; that such an applicant, may make an application in the prescribed form with appropriate fee, stating the question on which the said ruling is sought. The questions on which the ruling is sought is however, restricted to the 7 seven issues listed in section 97(2), ibid. Further, in terms of section 103, such a ruling shall be binding only on the applicant and on the concerned officer or the jurisdictional officer, in respect of the applicant - The applicant is not the person who intends to avail the ITC and that the ruling is sought on behalf of their members and shareholders who are distinct persons. This being the factual matrix, It is found that the applicant has no locus standi in seeking a ruling in the facts of the present case on this question to be precise.
Issues Involved:
1. Liability to pay tax under Reverse Charge Mechanism (RCM) for lease renewal amount payable to SMC. 2. Liability to pay tax under RCM for premium on lease renewal amount payable to SMC. 3. Applicability of GST under forward charge on collections made from shareholders/shop owners. 4. Effect of circular no. 101/20/2019-GST on the transaction. 5. Eligibility of shareholders/shop owners for Input Tax Credit (ITC) if GST is charged by the applicant. Summary: Issue 1: Liability to pay tax under RCM for lease renewal amount payable to SMC The applicant is liable to pay GST under Reverse Charge Mechanism (RCM) u/s 9(3) of the CGST Act, 2017, for lease renewal amount payable to Surat Municipal Corporation (SMC). This is in accordance with notification No. 13/2017-CT(Rate) which mandates that GST on services supplied by local authorities to business entities be paid on a reverse charge basis. Issue 2: Liability to pay tax under RCM for premium on lease renewal amount payable to SMC The applicant is also liable to pay GST under RCM u/s 9(3) of the CGST Act, 2017, for the premium on lease renewal amount payable to SMC. The lease of land is treated as a supply of services chargeable to GST, and the applicant falls within the ambit of a 'business entity' as per the definition under the Act. Issue 3: Applicability of GST under forward charge on collections made from shareholders/shop owners The collection made from shareholders/shop owners for making payment of lease and lease premium amounts is considered as a supply under section 7 of the CGST Act, 2017. Therefore, GST under forward charge is applicable on such collections. Issue 4: Effect of circular no. 101/20/2019-GST on the transaction The applicant is not entitled to exemption under Sr. No. 41 of notification No. 12/2017-CT (Rate) dated 28.6.2017, as amended, and the clarification issued vide circular no. 101/20/2019-GST dated 30.4.2019. The exemption is only available for long-term leases of industrial plots provided by State Government Industrial Development Corporations or similar entities, which does not apply to the applicant's situation. Issue 5: Eligibility of shareholders/shop owners for ITC if GST is charged by the applicant No ruling is passed on whether the applicant's shareholders/shop owners who are reimbursing the lease and lease premium amount can get ITC of the GST charged by the applicant. The applicant is not the person intending to avail ITC, and the ruling sought is on behalf of distinct persons (members/shareholders), which is beyond the scope of the applicant's locus standi. Ruling: 1. The applicant is liable to pay GST under RCM for lease renewal amount payable to SMC. 2. The applicant is liable to pay GST under RCM for premium on lease renewal amount payable to SMC. 3. The applicant is liable to pay GST under forward charge for collections made from shareholders/shop owners. 4. The applicant is not entitled to exemption under Sr. No. 41 of notification No. 12/2017-CT (Rate) dated 28.6.2017, as amended. 5. No ruling is passed regarding the eligibility of shareholders/shop owners for ITC.
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