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2024 (2) TMI 708 - AAR - GSTExemption from GST - upfront amount charged by the Applicant (as lease premium) for granting long-term lease of ninety years, in respect of allotment of plots to the industrial units or the developers, for the development of industrial infrastructure in the notified industrial town of NOIDA, such as for residential, commercial, retail, hospital, logistics etc. - Applicability of Entry No 41 of Notification No 12/2017-CT (Rate) dated 28.06.2017 (as amended by Notification No 32/2017-CT (Rate) dated 13.10.2017) and Entry No 41 of Notification No KA NI-2-843/XI-9(47)/17 (UPGST-Rate) dated 30.06.2017 - Whether the upfront amount charged by the Applicant (as lease premium) for granting long-term lease of ninety years is in the nature of transaction for sale of land and therefore outside the scope of levy of GST? HELD THAT - The infrastructure for financial business may include commercial/ mixed use. Thus, the commercial/ mixed use plot is exempted from GST as long as it is for development of infrastructure for financial business and other conditions as stipulated in the Notification 12/2017-CT(Rate) are satisfied - The model lease deed submitted by the applicant state that development of infrastructure for financial business. Hence, the leasing of industrial plots or plots for development of infrastructure for financial business by NOIDA to the industrial units or the developers in this notified area for commercial/ mixed use is exempted from the tax. In cases other than that, the applicable rate of Goods and Services Tax in case of leasing services is 18%. In Jharkhand Advance Ruling in the case of M/s. Ranchi Smart City Corporation Limited 2022 (1) TMI 1300 - AUTHORITY FOR ADVANCE RULING, JHARKHAND , the advanced ruling held the leasing of industrial plots or plots for development of infrastructure for financial business, a Government entity, to the industrial units or the developers in this Area Based Developed property for commercial/ mixed use is exempted from the tax. In cases other than that, the applicable rate of Goods Services Tax in case of leasing services is 18%. Whether the long-term lease is in the nature of sale of land, hence outside the scope of supply under the provisions of CGST Act? - HELD THAT - Para 2(a) of the Schedule II to the CGST Act stipulates that, any lease, tenacy, easement, licence to occupy land is a supply of services . There is no differentiation between long term or short-term lease. Further long-term lease cannot be equated to sale land since in the case of long term lease, the ownership of the leasehold land vests with the lessor. A lease deed is executed between both the parties. The relationship between both parties is that of Lessor and Lessee and not seller and buyer. Further Entry at SI No 5C of Notification 13/2017-CT (Rate) as amended, Entry at Sr No 41 of Notification 12/2017-CT (Rate) contain specific reference to the long term lease of land. Hence long-term lease of land is not outside the scope of supply under the provisions of CGST Act. The upfront amount charged by the Applicant (as lease premium) for granting long-term lease of ninety years, in respect of allotment of plots to the industrial units or the developers in the notified industrial town of NOIDA for development of infrastructure for financial business is exempt from payment of GST in terms of Entry No 41 of Notification No 12/.2017-CT (Rate) dated 28.06.2017 (as amended by Notification No 32/2017-CT (Rate) dated 13.10.2017) and Entry No 41 of Notification No KA.NI-2-843/XI-9(47)/17 (UPGST-Rate) dated 30.06.2017 - Further, the upfront amount charged by the Applicant (as lease premium) for granting long-term lease of ninety years is in not in the nature of transaction for sale of land and therefore the same is not outside the scope of levy of GST.
Issues Involved:
1. Exemption from GST on upfront amount (lease premium) for long-term lease of plots in NOIDA. 2. Nature of long-term lease as a transaction for sale of land and its applicability under GST. Summary of Judgment: Issue 1: Exemption from GST on upfront amount (lease premium) for long-term lease of plots in NOIDA The applicant, a statutory authority under the UPIAD Act, 1976, sought clarification on whether the upfront amount charged as lease premium for granting long-term lease of ninety years for plots in NOIDA is exempt from GST under Entry No. 41 of Notification No. 12/2017-CT (Rate) dated 28.06.2017. The applicant argued that the lease premium should be exempt as it falls under the scope of Entry No. 41, which provides a NIL rate of tax for upfront amounts payable for long-term leases of industrial plots or plots for infrastructure development for financial business by State Government Industrial Development Corporations or entities with at least 20% government ownership. The Authority for Advance Ruling (AAR) noted that the conditions stipulated in the notification were fulfilled by the applicant, including the long-term lease of over 30 years, allocation by an entity with 20% government ownership, and allotment to industrial units or developers in an industrial or financial business area. However, the AAR emphasized that the leased plots must be used for the purpose for which they are allotted, i.e., for industrial or financial activity. The AAR concluded that the upfront amount charged by the applicant for long-term leases in NOIDA for development of infrastructure for financial business is exempt from GST, provided the conditions of the notification are satisfied. Otherwise, the activity is taxable under GST. Issue 2: Nature of long-term lease as a transaction for sale of land and its applicability under GST The applicant contended that the long-term lease should be considered a sale of land, which is outside the scope of GST as per Para 5 of Schedule III of the CGST Act. The AAR, however, clarified that per Para 2(a) of Schedule II of the CGST Act, any lease, tenancy, easement, or license to occupy land is treated as a supply of services, irrespective of the lease term. The AAR further noted that long-term leases do not equate to the sale of land since ownership remains with the lessor, and the relationship is that of lessor and lessee, not seller and buyer. Consequently, the long-term lease of land is not outside the scope of GST. Ruling: 1. The upfront amount charged by the applicant for long-term lease of ninety years for plots in NOIDA is exempt from GST if the lease is for industrial plots or for the development of infrastructure for financial business and the conditions of the notification are satisfied. Otherwise, it is taxable under GST. 2. The upfront amount charged for granting long-term lease of ninety years is not in the nature of a transaction for the sale of land and is therefore not outside the scope of GST. This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to the provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.
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