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TMI Blog2021 (10) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... tification, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, for a period of 99 years which is further sub-leased based on plots allotted to its members/applicants; that to achieve the intended purpose, GHB receives contribution from its members who are well known Gem and Jewellery exporters which is used towards the Infrastructure cost of the facilities like road, drainage, park, water supply, etc. for the members/applicants as per their booked area; that the members contribution towards the infrastructure cost includes building of roads, storm water drainage, water distribution network, sewage network, landscape infrastructure, cable network, ESR water tank, sump, pump house, control room, sub-station, minor bridge on canal, approach road, electrical and power installation and fittings and street light infrastructure, Administrative cum Custom House Building, Compound wall etc. 3. GHB further submits that the amendment to Section 7(1) of the CGST Act, 2017 by insertion of new sub-clause(aa) through Finance Budget, 2021, has culminated the essence of Doctrine of Mutuality and upturned the hypothesis that the income which falls within the purview of the doctrine of mutuality is exempt from taxation; that this is despite of perpetu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Agreement to sale and actual sale through conveyance deed, by whatever name called, in the current transaction too, the activity of allotment of land initially, subject to permanent transfer after 15 years was one of the condition of sale/transfer of the land and not a separate transaction. Hence, it is clear that it is a sale/transfer of land and not leasing of the land. (iv) The transaction between GIDC and GHB was of Conditional sale of land and the intention was not lease of land for earning rent income. Here it is significant to look at the substance of the transaction rather than just the legal form. (v) The said long term lease and sublease for the long term period is taxed under Gujarat Stamp Duty Act, 1958 at prevailing stamp duty rates equivalent to the sale of property (calculated on the Jantri value of the land or consideration whichever is higher) treating the long term lease transaction as transfer of immovable property at the stamp duty amount. Consequently, it is construed that Stamp Duty is levied on the transaction and this is not a transaction registration or documentation procedure fee. The registration fees are paid separately for registration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the transfer of a share or shares of a company registered or incorporated outside India. Transfer of Property Act, 1882 [53A. Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has. in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 2 ***, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed there for by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GIDC shall mutatis mutandis apply to sub-lease creating a deeming fiction as if the deed is being executed between GIDC and sub-lease. The purpose of the Government to promote the industry can endure and sustain only if intention of the legislature to exempt certain category of persons (State Government Industrial Development Corporations or undertakings or by any other entity having 20% or more ownership of Central Government, State Government, Union territory) from tax for a specific purpose is to be applied to other person with similar purpose as well. Pursuant to the above, the supplier of land for all purpose is deemed to be GIDC. (xi) The word lease and/or sub-lease mentioned in various agreements/documents in relation to these transactions are merely for the understanding of the common public. However, it does not reflect the true character or essence of the transaction. Consequently, the transaction is between businesses and the GIDC, wherein the GHB is merely a facilitator or collective voice of entire business community holding/desirous of holding the land in this park. (xii) Taxing the contribution received from the property member would be akin to cascad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Finance Act, 2021. (e) Advance Ruling decision dated 22-4-2021 given by the Karnataka Advance Ruling Authority in the matter of M/s. Bowring Institute. (f) State of West Bengal Others vs. Calcutta Club Limited and Chief Commissioner of Central Excise and Service Others [2019(29) GSTL.545 (SC)]. (g) Entry No.41 of the Notification No.12/2017-CGST (Rate) dated 28-62017 as amended from time to time. (h) Extract of the Additional Agenda of the 22nd GST Council Meeting. 6. GHB has submitted the following: i. Lease Deed between GIDC and GHB on 27-3-08 for Plot Nos.X2, X2A X3 (totally admeasuring 2,30,970 sq. Mtrs. Land), known as DTA at Ichchapore, Surat, Gujarat. The cost of land has been worked out at ₹ 225/- per sq.mtr. and accordingly the total cost of the land has been worked out to ₹ 5,19,68,250/- and on payment of the said amount of Rs,5,19,68,250/-, the demised land has been leased to GHB for a term of 99 years computed from 22-4-04. As per the lease deed, the land is allotted on as it is where it is basis for the purpose of setting up the Gem Jewellery Park on the demised premises. GHB has also been given the mandate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case beyond the period of principal lease deed. M/s Sonani Jewels pvt.ltd., Surat is also required to pay an annual lease rent at the rate of ₹ 2/- per square metre to GHB. 7. Question on which Advance Ruling sought? a. Whether the contribution paid/payable by the members towards Development Cost of the Bourse amounts to supply liable to Goods and Service Tax? b. Whether the said Contribution by members towards Development Cost of Bourse for the promotion of Exports of Gem and Jewellery would be exempt under Entry No.41(Heading 9972) of Notification No.12/2017Central Tax(Rate) dated 28-6-2017 (hereinafter referred to as the said Notification)? 41 Heading 9972 One time upfront amount (called as premium, salami, cost, price, development charges or by any other name) leviable in respect of the service, by way of granting long term (thirty years, or more) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings to industrial units. NIL NIL c. Once the captioned amendment to section 7(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) reads as follows: the activities or transactions, by a person, other than an individual to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration. And also as per Circular No.101/20/2019-GST dated 30-4-2019 of Department of Revenue, Ministry of Finance, reads as follows: Upfront amount(called as premium, salami, cost price, development charges or by any other name) payable in respect of service by the way of granting of long term lease(of thirty years or more) of industrial plots for development of infrastructure for financial business provided by State Government Industrial Development Corporations or undertakings or by other entity having 50% or more Ownership of Central Government, State Government, Union Territory to the Industrial Units or Developers in any industrial or Financial Business area is exempted from Tax as per SAC 9972. It means that the Long Term Lease is granted by Government Authority is exempted from tax but if the lease is granted by other than the authority which is not mentioned in the above para is taxable under the GGST Act, 2017. Personal Hearing 10. Shri Hardik Modh, Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons between GHB and its members/applicants. 13.1 We refer to the definition of Supply as per Section 7 CGST Act which reads as follows: 7. (1) For the purposes of this Act, the expression supply includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business ; 13.2 We also refer clause 2 (a) of Schedule II which read as follows : ACTIVITIES [OR TRANSACTIONS] TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 2 (a) any lease, tenancy, easement, licence to occupy land is a supply of services 13.3 Further, as per the inclusive definition of business, as per Section 2(17) CGST Act, Business includes- a. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; b. any activity or transaction in connection with or incidental or ancillary to sub-clause (a); c. any activity or transaction in the nature of sub-clause(a), whether or not there is volume, frequency, continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of this exemption, the Central Government, State Government or Union territory shall have 50 per cent. or more ownership in the entity directly or through an entity which is wholly owned by the Central Government, State Government or Union territory. . NIL NIL 16.1 On reading the words of the said entry of Notification, we find that the exemption is available for subject leasing of plots by GIDC to GHB for the period of 99 years. The description of services, in subject matter, may be read as long term leasing services of the subject plots by GIDC to GHB (Developer). 16.2 We find that subject entry 41 to said Notification provides exemption for providing said services by GIDC to GHB (developer). In this regard, we find 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We hold that GHB is not State industrial development corporation and thereby cannot claim eligibility to exemption on consideration received from its applicants. 18. Further, We, suo-moto, examine the GST scheme of law in detail and find it worth mentioning the entry No. 77 to Notification No. 12/2017-CT (R) dated 28-6-17 in this regard, which is reproduced as follows : 77 Heading 9995 Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and Service Tax; or (c) up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex. Nil Nil 18.1 Here, we note that as GIDC supply of subject service to GHB is exempted, thereby vide sr no 77 to said Notification, GHB sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued as it was prior to the insertion of Section 7(1)(aa) CGST Act, with effect from 1-7-2017. Our thought process is explained as follows: a. Firstly, GHB is not an unincorporated association. b. GHB is a Not for profit Company incorporated under erstwhile Section 25 of Companies Act, now section 8 of Companies Act, 2013. c. As per Section 7(1)(a) CGST Act, Supply includes all forms of supply of services, including lease, for consideration by a person in the course or furtherance of business. d. Person, as per Section 2(84) CGST Act, includes, inter alia, a Company; an association of persons or a body of individuals, whether incorporated or not, in India or outside India. e. Business, as per section 2(17) CGST Act, inter alia, includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (e) provision by a club, association, society or any such body (for a subscription or any other consideration) of the facilities or benefits to its members. f. Thus, from the conjoint reading of the provisions of GST law, in our present case, Supply inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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