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TMI Blog2024 (8) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... SHTRA GOODS AND SERVICES TAX ACT, 2017) The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act respectively] by M/s. Maharashtra Metro Rail Corporation Ltd . the applicant, seeking an advance ruling in respect of the following questions. 1. Whether the Applicant is eligible for exemption under Sr. No. 41 of Notification no. 12/2017-Central Tax (rate) dated 28 June 2017 ( exemption notification )? 2. If not, whether 18% GST Will be applicable on the leasing services provided to M/s. Abhijit Realtors and infra ventures Pvt. Ltd. ( Service recipient )? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression GST Act would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 41 of Notification no. 12/2017-Central Tax (rate) dated 28 June 2017. 2.3. While the lease period is more than 30 years as mentioned in LOA, the Applicant does not satisfy other conditions mentioned under the exemption notification. Brief of such conditions is reproduced below- Sr.No. Condition Para reference 1 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,... 3.4 2 .... of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20% or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area. 3.5 3 Provided that the leased plots shall be used for the purpose for which they are allotted, that is, for industrial or financial activity in an industrial or financial business area: 3.6 4 Provided also that the lease agreement entered into by the original lessor with the original lessee or subsequent less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd use as parking and commercial and further states that considering Airport in the vicinity, best suited for Hospitality Sector and Institutional use . 2.5.6. Therefore, the applicant believed that the area cannot be treated as industrial or financial business area in absence of any evidence in support. Therefore, the benefits of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, are not available to the Applicant. 2.5.7. Further, the Hon ble High Court Bombay has dealt with the identical issue in the matter of Writ Petition No. 12194 of 2017 in the case of Builders Association of Navi Mumbai and Neelsidhi Realties v. Union of India. 2.5.8. Similar advance ruling has been given by the Gujarat Advance ruling authority in the case of Jinmagal Corporation. 2.5.9. From the above facts and references, we understand the licensed space cannot be termed as industrial or financial plot. 2.6. The space is not intended to be used for industrial or financial property 2.6.1. As stated above, the rented space is proposed to be used for parking or hospitality or institutional use, therefore not satisfying the said condition. 2.7. Agreement does not mention that central tax shall be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... 2 .... for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20% or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area. 3 Provided that the leased plots shall be used for the purpose for which they are allotted, that is, for industrial or financial activity in an industrial or financial business area: 4 Provided also that the lease agreement entered into by the original lessor with the original lessee or subsequent lessee, or sub-lessee, as well as any subsequent lease or sale agreements, for lease or sale of such plots to subsequent lessees or buyers or owners shall incorporate in the terms and conditions, the fact that the central tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements and that the parties to the said agreements Non-Satisfaction of condition mentioned in Sr. No. 1 above table: 3.3.1 I have referred to Clause A 1. a) of LOA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. It is also noted that the purpose of issuance of tender as mentioned in the cover page of the tender document is Bid for allotment of commercial space adjacent to Airport Metro Station (Reference-Cover Page of E-Tender Notice) 3.3.12. Therefore, I am of the opinion that the area cannot be treated as industrial or financial business area in absence of any evidence in support but it can be treated as commercial area. 3.3.13. Further, I would like to attract your attention towards the judgement of Hon ble High Court Bombay, Writ Petition No. 12194 of 2017, in the case of Builders Association of Navi Mumbai and Neelsidhi Realties v. Union of India1. 3.3.14. Similar advance ruling has been given by the Gujarat Advance ruling authority in the case of Jinmagal Corporation. 3.3.15. The above facts and references, support the view of the register tax payer and in my opinion licensed space cannot be termed as industrial or financial plot. Non-Satisfaction of condition mentioned in Sr. No. 3 and 4 above table: 3.3.16. From the Leasing Agreement and Tender Document, I find that the purpose of rented space is for parking or hospitality or institutional use, and not for industrial or financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment Company registered under the Companies Act 2013. It is established by central government and state government with 50% equity of each. 5.1.2 The applicant floated tender calling for bids for Allotment of Commercial space admeasuring 2899.00 sq meters/ 10,000 Sqm. Built-up area and 4,054 Sqm basement; adjacent to Airport Metro Station, bearing Kh. No. 147 (P) Mz. Somalwada vide Tender No-N1PD-12/2019 dated 09/06/2019. 5.1.3 M/s. Abhijit Realtors and Infraventures Pvt Ltd. (hereinafter referred as Abhijit ) was successful bidder. Consequent to acceptance of the bid agreement was signed on 18th July 2022, between the applicant and M/s. Abhijit. Some of the Important clauses required for decision are reproduced below, Title of Agreement: -License Agreement for allotment of commercial space adjacent to Airport Metro Station for a period of 60 buyers. Name of Work: Allotment of commercial space adjacent to Airport metro station. 5.1.4 Relevant terms of agreement are as under: Definition clauses- a. License period means a period of 60 years the date of deemed transfer of commercial space to the licensee and ending on the Transfer Date; b. Licensed Space means the specified bare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST as applicable (Rupees three Crores Twenty-Five Lakhs Only) Within 180 days from the effective date B. The Annual License Fees: a. The licensee has quoted an amount of Rs. 45.84 per Sqm per month towards the annual license fees for the first years of operations of the commercial space. b. The annual license fees as quoted shall be paid on annual basis, during the entire license tenure and shall be paid on higher of 10,000 Sqm or the actual built-up area constructed in the project. f. Annexure 1- Details of Land for Construction of Built-up Space- The designated land use for the built-up space to licenses to Abhijeet is stated in Annexure 1: Details of land for construction of Built-up Space Land details Area: 2899 Sqm Designated Land use Parking and commercial However, considering airport in the vicinity, best suited for hospitality sector and institutional use. Allowable FSI As per applicable unified Development control and promotion rules, 2022 (UDCPR-2020) Planning Authority Maharashtra Metro Rail Corporation limited Accessibility Road the proposed station has direct accessibility via wardha road rail suburban Railway Station: Khapri (6.8KMs) and Nagpur (9.2KMs) Air Nagpur in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are pertaining to upfront payment of Rs. 10.26. Cr only. 5.3 Provisions of Law relevant and applicable to decide the issue are; - 5.3.1 Classification of services and HSN codes and Explanatory Notes applicable are 9972 - Classification of services Sr. No. Chapter, section, Heading or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 220 Heading 9972 Real estate services 221 Group 99721 Real estate services involving owned or leased property 222 997211 Rental or leasing services involving own or leased residential property 223 997212 Rental or leasing service involving own or leased non-residential property 5.3.2 Classification in Notification No 11/2017-Central Tax (Rate) for levy of Tax- Sr.No. Chapter, Section or Heading Description of Service Rate (Per cent.) Condition (1) (2) (3) (4) (5) 14 Section 7 Financial and related services; real estate services; and rental and leasing services. 16 Heading 9972 (i) Services by the Central Government, State Government, Union territory or local authority to governmental authority or government entity, by way of lease of land. Nil - (ii) Supply of land or undivided share of land by way of lease or sub lease where such supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms and conditions, the fact that the central tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements undertake to comply with the same.] 5.4 To decide the issue of applicability of exemption entry No. 41 of 12/2017 central tax rate dated 28.06.2017 following issue need to be decided. 5.4.1 Whether the applicant is undertaking or any other entity having 20% or more owner ship of central govt or state government? a. Submission of Applicant-owner ship of the Government is 100% (50% each of Central Government State Government) b. Submission of Jurisdictional Officer-owner ship of the Government is 100% (50% each of Central Government State Government) c. Findings, observation, discussion decision. Article of Association of the Applicant Company provides for share Capital Article as under- Article No. 4-Share Capital -(ii) So long as the Company is a Special Purpose Vehicle (SPV) in the nature of a Joint Venture with contribution from Government of India, the Paid-up Share Capital of the Company will be constituted as follows: Paid up Share capital Contributed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed space for period of 60 years to M/s Abhijit, subject to other terms in contract. 5.4.4 whether license or lease is or industrial plot for development for infrastructure for finance business? a. Submission of Applicant- Licence of commercial space. b. Submission of Jurisdictional Officer - Licence of commercial space. c. Findings, observation, discussion decision I) Please refer the Government Notification dated 14-March 2018. It clearly states the purpose of Land use is for parking lots, stations and for commercial use from this GR it is very clear that the plots are not for any industry not for financial business. II) Please refer Annex-1 of the Agreement. The bare shell structure is suitable for commercial use best suited for hospitality sector and institutional use. As under: Designated Land use Parking and commercial However, considering airport in the vicinity, best suited for hospitality sector and institutional use. 5.5 Decision- (i) Considering aforesaid decision form, the issue we are of the opinion that conditions of the entry 41 are not fulfilled by the applicant in this transaction. In the taxation law claim of exemption is to be interpreted strictly and burden is on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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