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TMI Blog2020 (7) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was publicized by RLDA for grant of lease for residential 86 commercial development along with development of financial infrastructure on 6.84 Ha (approx.) of Railways land at Hazari Bagh, Ajmer for 99 years on 15.02.2018; 2. that the Applicant Company M/s. H.S. Mehta Infra Pvt. Ltd. Ajmer submitted the bids and their lead partnership for Plot A at ₹ 159818170.00 lease premium and for Plot B as ₹ 319074800.00 lease premium. It was mentioned in the financial bid Form-12 of both plot A and B that the applicable taxes / duty /GST, if any shall be payable extra by the bidder in addition to the above quoted / offered rates (lease premium and annual lease rent); 3. that after the bids were submitted the Letter of acceptance (LOA) (page 16-17 of lease agreement) was issued on 26.09.2018 by RLDA to the highest bidder i.e. the Applicant, of combined land parcels of two plots A and B having quoted combined lease premium of both plots as ₹ 478892970.00 with their letter No. 371 dated 26.09.2018. As per payment schedule of bid Form 12 it was requested by RLDA to the Applicant to Form a new SPV as per conditions mentioned in the bid and pay ₹ 158657105 towards t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom the land is given for undertaking commercial development and financial infrastructure on a long term lease of 99 years vide a lease agreement. A certain amount has been paid by the Applicant Company before entering into the lease Agreement as Security Deposit. The Long term Lease Agreement has been entered into between the Applicant Company and RLDA on 08.11.2019. It is important to note here that the amount paid by the Applicant Company in the month of February, 2019 was neither an advance nor a lease premium but is in the form of Security and if the Lease agreement is not entered then as per clause 26 of the agreement such amount is refundable in full. The said amount payable was paid after the bid was confirmed but before the execution of Contract of lease; 8. that on perusal of the Long term lease agreement dated 08.11.2019 (enclosed herewith and marked as Annexure-1) Clause 26 enlists certain conditions on breach of which the contract would stand terminated and the bid security paid by the Company would stand forfeited. However, it is to be noted that the amount otherwise paid to RLDA is fully refundable and the said arrangement is without prejudice to any other rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain conditions have been prescribed in the said Notification which have not been violated by the Applicant and hence is squarely covered under the said Notification and is exempt from any GST liability for the amount paid in lieu of the agreement executed on 08.11.2019. The said entry is reproduced hereunder for your kind perusal: 41B Heading 9972 Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. The amount of GST exemption available for construction of residential apartment in the project under this notification shall be calculated as under: [GST payable on upfront amount (called as premium, salami, cost, price, development charges or by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any services of lease were extended by RLDA in the form of possession to the applicant therefore the amount if paid as premium was in pursuance to an agreement executed after the exemption Notification came into effect; 14. that without prejudice to the above submissions, on perusal of the Long term lease Agreement, it can be seen that the Applicant is also involved in the development of infrastructure on the land given on long term lease by the RLDA. Along with the development of residential plots, the Applicant is also engaged in developing the roads, sewage system, laying of the street lights, etc. The said transaction and any upfront amount paid in this respect (whether in installments or otherwise) is exempt under the provisions of CGST Act, 2017 by virtue of Entry No. 41 under Notification No. 12/2017-Central Tax(rate) dated 28.06.2017. The said entry is reproduced hereunder for your kind perusal: 41 Heading 9972 Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease (of thirty years, or more) of industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tender and lease agreement dated 08.11.2019 is exempt 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? iii. Whether the amount of ₹ 158657105.00 deposited during February, 2019 is exempt under Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017? C. PERSONAL HEARING In the matter personal hearing through video conference was granted to the applicant on 20.05.2020. Shri Pankaj Ghiya, Advocate (Authorized Representative) of applicant appeared for PH. During the PH, he reiterated the submissions already made in the application. He also submitted additional submission through email on the same day and on 5.6.2020. He further requested that the case may be decided at the earliest. D. COMMENTS OF THE JURISDICTIONAL OFFICER Comments received from the Assistant Commissioner, Central Goods Service Tax Division, Ajmer vide letter dated 12.5.2020 are reproduced as under: - 1) Whether the lease agreement between the applicant Company i.e. the lessee and RLDA for a period of ninety-ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion that applicant company has transferred ₹ 15,86,57,105/- as security deposit in pursuance to the tender and lease agreement dated 08.11.2019. Whereas, as per agreement dated 08.11.2019 made between RLDA and Applicant Company at page No. 3 (as per copy forwarded with the application of the applicant), it was clearly mentioned that (F) The lessee/ selected bidder in compliance of the term and condition of the LOA has (a) paid to RLDA following amount towards the first installment of the lease premium as specified in the WA/ schedule of payment in the following manner- Date 16.02.2019 to 22.02.2019 total ₹ 15,86,57,105/- . Thus, the contention of the applicant company appears not correct, as it is not security deposit, but it is a part of lease premium, which is not exempted from levy of GST as per view of this office. 3) Whether the amount of ₹ 15,86,57,105/- deposited during February-2019 is exempt under Notification No.04/2019-Central Tax (Rate) dated 29.03.2019 or Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017? Comments : As per Notification No.04/2019-Central Tax (Rate) dated 29.03.2019, the contents under 41B is reproduced as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion certificate or first occupation. The liability to pay central tax on the said proportion of upfront, amount (called as premium, salami, cost, price, development ; charges or by any other name) paid for long term lease of land, calculated as above, shall arise on the date of issue of completion certificate or first occupation of the project, as the case may be. Therefore, the amount deposited by the applicant company i.e. M/s Hazari Bagh Builders Pvt. Ltd., Ajmer appears not exempted from the purview of GST. Thus, in view of this office, reply for question No.3 is not affirmative. E. FINDINGS ANALYSIS CONCLUSION: 1. We have considered the submissions in their application and during the personal hearing made by the applicant, we find that the Rail Land Development. Authority (hereinafter referred to as RLDA ), New Delhi issued a Request for Proposal (RFP) vide RFP No. RLDA/RFP/CD/07 dated 15.02.2018 for residential development of 7.337 Ha (approx.) of Railways land at Hazari Bagh, Ajmer on lease for 99 years. The portion of 7.337 Ha land has two plots viz. Plot A of 2.25 Ha and Plot B of 5.08 Ha. 2. The consortium of M/s H S.Meh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandated that the highest bidder will form a SPV and will deposit first installment. Further, the applicant himself in his submissions stated that as against bid security of both the plots, they deposited ₹ 33,00,000/- for Plot A and of ₹ 52,00,000/- for Plot B. Therefore, the contention that the money deposited is not a lease premium but a security amount is not rational and tenable. The first installment of the lease premium was made to the RLDA after LoA. Whereas the amount so paid to secure and confirm the execution of the contract was bid security amount (₹ 33,00,000/- for Plot A of ₹ 52,00,000/- for Plot B). Therefore, amount of ₹ 15,86,57,105/- is installment of lease premium. 9. Whereas, the applicant is contesting that as per clause 26.3 of the tender bid and lease agreement page number 400, the entire amount except security bid amount will get forfeited in case of any default on part of the applicant is also not valid on the ground that every agreement is de-novo in itself and conditions may vary from each other except the conceptual facts and principles. The amount of ₹ 15,86,57,105/- as lease premium was deposited after issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is a statutory authority constituted under the Railways Act, 2005 with obligation, inter alia of development on Railway land for commercial use, entrusted to it by the Central Government for the purpose of generating revenue by non-tariff measures. We observe that in background of its function, especially of generating revenue, RLDA is leasing the parcels of land and thus it is a rental or leasing service of land for commercial function. In a way, it is clear from facts that RLDA is supplying rental or leasing service involving own land. The said service is classifiable under HSN 9972 12 rental or leasing services involving own or leased non-residential property . Further, the Services of HSN 997212 falls under Serial No. 16 (iii) of the Notification 11/2017- Central Tax (Rate) dated 28.06.2017 (as amended) and attracts GST @ 18% (SGST 9% + CGST 9%). The relevant extract of the said Notification is as under- Sl.No. Chapter, Section, Description of Services Code (Tariff) Description of Services Rate (per cent.) Condition 16 Headi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.06.20 17 (as amended). Thus, we find that, the leasing services supplied by the RLDA to the applicant falls under HSN 997212 attracting GST @ 18% (SGST 9% + CGST 9%). 13. The applicant has further made a contention that leasing services provides by RLDA to them is exempt from GST as provided under Serial No. 41B of Notification 12/2017- Central Tax (Rate) dated 28.06.2017 as amended vide Notification 04/2019-Central Tax (Rate) date 29.03.2019. The relevant portion of the Notification 04/2019-Central Tax (Rate) date 29.03.2019 is as below: 41B Heading 9972 Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. The amount of GST exemption avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued on dated 29.3.2019 and it clearly mentions that it will be applicable for upfront amount payable on or after 01.04.2019 but in the instant case the amount of ₹ 15,86,57,105/-was deposited by the applicant during the month of Feb, 2019 which is prior to the applicable date 01.04.2019 of the said Notification. b. Further, as discussed in the para 9 above the Time of Supply of Services in cases of RCM viz. Section 13(3) of GST Act, 2017, which is applicable to applicant in the instant case is Feb 2019 and as the applicant has deposited the lease premium in Feb 2019 the GST liability, Time of Supply of Service and Point of taxation are applicable in Feb, 2019. Thus, the said Notification is not applicable in the instant case. Thus, we find that the contention made by the applicant regarding applicability of Serial No. 41B of Notification 12/2017-CT (R) dated 28.06.2017 (as amended) is not tenable. 14. Whereas, the applicant has also made a contention for applicability of Serial No. 41 of Notification 12/2017-CT (R) dated 28.06.2017 (as amended) read with Circular No. 101/20/2019-GST dated 30.04.2019. The relevant entry of the Notification is reproduced here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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. In view of the foregoing, we rule as follows: - RULING i. 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. ii. 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. iii. The 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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