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TMI Blog2025 (4) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... fies as 'neither a supply of goods nor a supply of services' under Section 7 read with entry 5 of Schedule III of the GST Laws? c) Whether the sale of items of plant and machinery in terms of the Asset Purchase Agreement qualifies as taxable supply of individual goods under GST Laws? If yes, whether GST would apply on the price agreed between the parties for the sale of each such items under the Asset Purchase Agreement, as per classification and rate applicable to each item? 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 PER THE APPLICANT: 1.1. General Motors India Private Limited, having its manufacturing facility at Plot No. A-16, MIDC Phase expansion II, Talegaon, Pune 410504, Maharashtra (hereinafter referred to as "GMI"/ "Company"/ "Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptured the details of individual asset prices (in US $) at which each such asset is planned to be transferred to HMI by the Applicant. An aggregation or a summary of these individual asset prices was contained in Schedule 1 of the Term Sheet. 1.7. Further, the items of plant and machinery proposed to be sold were mentioned in Appendix-A (9765 items) of the Term sheet along with the price of each of the assets. The buildings proposed to be sold by the Applicant, were mentioned in Appendix-B (41 buildings in total) of the Term sheet with the construction date, area, and value of each of the buildings. Agreement entered into with HMI for the sale of assets. 1.8. Pursuant to the Term Sheet, the parties executed an Asset Purchase Agreement dated August 16, 2023 together with four subsequent amendments dated October 17, 2023, October 31, 2023, December 05, 2023 and December 18, 2023 (collectively referred to as the 'the APA') to give effect to the sale of the assets covered by the Term Sheet. The relevant principles of the said Term Sheet were incorporated into the APA for the planned sale of the identified assets from GM India to HMI. With the signing of the APA, the Term Sheet cease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed to negotiate the price for each asset: a. The Applicant undertook an assessment of the market values of each of the asset items and provided that assessment to HMI. b. HMI independently reviewed the assessment undertaken by the Applicant and undertook their own independent assessment of the prices for each asset item under discussion. The assets were also inspected during physical verification, based on fixed assets register of GMI. c. Based on the independent assessment undertaken by HMI, a price proposal was made by HMI at an asset item level, which was accepted by GMI. Certain fully depreciated assets that were at the end of their useful life were valued at INR 1. 1.12. The following clauses from the APA are relevant in the context of the questions at hand: WHEREAS: A. GM INDIA has agreed to sell, transfer and assign to HMI, and HMI has agreed to purchase and accept the transfer and assignment of (each subject to the terms and conditions and in the manner set forth herein) the Transferred Assets (as defined hereinbelow) on an itemized-asset sale basis on the terms and conditions set forth herein. B. The Parties are entering into this Agreement to record the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for undertaking business operations, at the value agreed with regard each of the assets. Individual prices were agreed for each asset being transferred in the APA and is documented in Schedule 2(to the APA read along with relevant annexures. Hence, the total consideration mentioned in the APA is an aggregation of the individual prices determined for each of the assts under respective category: Sr. No. Transferred Asset Purchase price (In INR as per the APA) 1. Land lease rights with respect to GM India's Talegaon manufacturing facility 529,29,18,180 2. Plant & Machinery 43,52,52,372 3. Buildings 214,36,36,237 4. Total 787,18,06,789 The sale of assets is subject to fulfilment or waiver of the conditions stipulated in the Paragraph-5 of the APA ("Conditions Precedent"). Further, the APA was amended through Amendment No 1 & 2 that are attached with this application. Thereupon, APA was amended on December 05, 2023 and December 18, 2023 referred to as the 3rd and 4th Amendment, wherein through the 4th amendment the Applicant has agreed to sell identified buildings to HMI (which under the Term Sheet were proposed to be sold by CSIPL to HMI, but were subsequently acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assification of goods and services under GST and the value of goods and services for the purpose of payment of GST is within the domain of this Hon'ble Advance Ruling Authority in terms of Section 97 of the CGST Act. Hence, the present application is maintainable as per the provisions of the GST Laws before this Hon'ble Advance Ruling Authority. 1.16. That in the present case, the ruling is being sought on the transaction under the APA, and thus, the application is maintainable. In this regard, reliance is placed on the decision of the Maharashtra Authority for Advance Ruling In Re. Municipal Corporation of Greater Mumbai 2020 (34) G.S.T.L. 371 (A.A.R. - GST - Mah.), wherein it was held that as per Section 95, the term 'advance ruling' means a decision provided by the authority to the applicant on matters or questions specified in Section 97 (2), in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 1.17. Further, in the following rulings, the Maharashtra Authority for Advance Ruling has given a ruling on the questions of whether the transactions in the relevant case qualifies as a supply of goods or services or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces made by one person to another for consideration such as sale, barter, lease, exchange, etc. The said Section 7 of the CGST Act is extracted below: "(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, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) 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. Explanation. For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r payable' for the supply of goods or services or both, where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply. The provision further deals with inclusions and exclusions from the value of supply. The said Section 15 of the CGST Act reads as follows: "15. Value of taxable supply. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include,- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier, (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the APA, at the rate prescribed as per their individual HSN classification. Further, sale of buildings is not liable to GST. The submissions in support of this legal position proposed to be adopted by the Applicant are as follows: A. Assignment of land lease rights qualifies as supply of service under GST A.1. The Applicant in terms of the APA would assign the leasehold rights of the land leased to them by the MIDC to HMI. That vide Lease Deed dated July 03, 2010, MIDC leased Plot No. A-16 in the Talegaon Industrial Area, admeasuring about 300 acres to the Applicant for a period of 95 years, for setting up factory and related offices, facilities, and infrastructure, for inter alia manufacturing and assembling automotive vehicles and parts distribution. A.2. The value of such assignment of leasehold rights, as per Schedule 2 of the APA is INR 5,292,918,180. A.3. Further, as per Clause 5.1 of the APA, one of the conditions of the agreement is that the MIDC should have approved the assignment of lease deed dated July 03, 2010, between the Applicant and MIDC in favour of HMI and Applicant shall deliver to HMI necessary documentation confirming payment of assignment fees/tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is charged. [Explanation. For the removal of doubts, it is hereby clarified that the expression "services" includes facilitating or arranging transactions in securities;];" A.7. That as per the CGST Act, while goods mean every kind of movable property, services encompass anything that is not goods under the CGST ACT. Therefore, the term 'service' has been given a very wide amplitude under the GST Laws. A.8. In the present case, by application of the guiding principles outlined under the definition of supply, the following position elaborated in the ensuing paragraphs emerges. A.9. Firstly, the Applicant is proposing to assign the land lease rights for INR 529,29,18,180, which qualifies as a service and not supply of goods as there is transfer of rights and not any movable property. A.10. Secondly, it is clear from the APA that the leasehold rights will be transferred for an amount of INR 529,29,18,180. Thus, the requirement of consideration has been satisfied in the present case. A.11. The Applicant further submits that the assignment/transfer of leasehold rights has been undertaken by the Applicant in the course of its business. The term "business" is defined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the leasehold interests held by the applicant in favour of M/s. INOX Air Products Private Limited is 'Supply' as defined under Section 7 of the CGST Act. The relevant extract of the ruling is as follows: "7.1 From the facts of the case as available before us, it is seen that IPL was allotted and were holding lease of 15.34 acres of land in the SIPCOT Industrial Complex at Hosur(phase-II). The Original lease was entered into for a period of 99 years and the lease was entered into vide lease deed dt. 07.07.1993. INOX had approached them to transfer un-utilized portion of the allocated land to the extent of 5.00 acres for setting up a state of the art Ultra High Purity Cryogenic Liquid Medical and Industrial Oxygen Plant. A Memorandum of Understanding (MOU) has been entered into between the applicant and INOX on 20.11.2020 for transfer of leasehold rights for the remaining period of lease from IPL to INOX subject to the approval of SIPCOT in respect of the land measuring 5.00 acres ... .... 5 From the above facts of the case, it is evident that SIPCOT who owns the land has leased the allocated land to IPL for a period of 99 years. IPL by virtue of the lease conditions, do not po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into between IPL and INOX for the activity of agreeing to part with the leasehold rights held by IPL in favour of INOX, it is seen that IPL assures to undertake certain activities and INOX acknowledges the same which clearly exhibits the relationship between IPL and INOX as a service provider and recipient. The compensation for parting with the interests is definitely a consideration for agreeing to part with the interests held by IPL in the leasehold. The transaction is not a transfer of leasehold as IPL by the clauses of Lease deed executed with SIPCOT is not permitted to sub-lease. The activity of IPL as seen from the Memorandum of Understanding executed between IPL and INOX and the approval letter of SIPCOT, is only a transaction in which IPL agrees to part with the leasehold interests it possess for the remaining lease period in favour of INOX with the approval of SIPCOT in respect of the land required by INOX. Therefore, the activity is not transfer of leasehold rights by IPL to INOX but is an activity of agreeing to part with the leasehold interests IPL hold on the land to be leased to INOX by SIPCOT. If it were a transfer of leasehold rights, there should be an agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act. B.4. It is pertinent to note that Entry 5 of Schedule III reads as follows: "Schedule III - Activities or Transactions which shall be treated neither as a supply of Goods nor a supply of Services B.5. In terms of Entry 5 of Schedule III of the CGST Act, sale of building subject to clause (b) of paragraph 5 of Schedule II, is not covered in the scope of 'supply' and hence, not liable to tax under the Act. Further, clause (b) of paragraph 5 of Schedule II reads as follows: 5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building." "5. Supply of services The following shall be treated as supply of services, namely :- (b) construction of a complex, building, civil structure or a part thereof, including a complex or building 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." B.6. The Applicant submits that for the purpose of present application, the aforesaid clause (b) of para 5, Schedule II is not relevant as the buildings proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to sell various machinery and equipment outlined therein to HMI. Further, the price of each of these plant and machinery has been specifically agreed and stands outlined in Annexure - A of Schedule 2 to the APA. C.2. That the APA also enlists the price of plant and machinery, equipment, etc, to be transferred to HMI in Schedule 2. It is relevant to note that under the APA, the plant and machinery to be sold are categorically listed with the intention to sell each of these items independently, as per the individual prices agreed that is the value taxable as per the applicable HSN rates on stich prices. Hence, the 9,664 items to be sold to HMI would be sold for the consideration specific to each of the assets in the given list at the applicable GST rates. C.3. As discussed above, in terms of Section 7 (1) of the CGST Act, any supply of goods and services for consideration, in the course or furtherance of business, is a taxable supply under the CGST Act. In the present case, the sale of plant and machinery fulfils all the conditions mentioned in Section 7 of the CGST Act in the following manner: * The levy of GST is on supply and the scope of supply is discussed in Section 7 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r service. Thus, there has to be a reciprocal payment or an act so as to qualify as a consideration for a supply. * In E-Square Leisure Put. Ltd. 2019 (24) GSTL 125 (A.A.R. - GST), the Maharashtra Advance Ruling Authority explained the scope of the term "consideration" as follows: "The definition of consideration is inclusive and the consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition it is clear that there should be a close nexus between the payment and supply and thus any payment/exchange/barter etc. would be treated as consideration for supply and liable to GST." * In the present case, as per APA, it is evident that the purchase price for the transfer of assets is the individual prices agreed between the parties as provided in the Schedule-2 of the APA read along with Annexure A of Schedule-2 to the APA therein. Similarly, in the APA, Annexure-A lists out the individual assets, under 'plant and machinery', to be transferred to HMI along with their prices. * Prices of each of the above items of plant and machinery were separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the CGST Act, the value of supply shall be the transaction value, i.e., the price paid for the supply inter alia where the price is the sole consideration, and the parties are not related. In other cases, the value is determined as per the valuation rules. C.7. In the present case, it is clear that GM India and HMI do not qualify to be related persons in terms of the explanation to Section-15 of the CGST Act, 2017. Also, no consideration whatsoever shall be payable by HMI over and above the value of each of the assets in the mentioned APA. The invoice will be raised by GM India on HMI for the full amount i.e. for the full value of the goods being supplied. C.8. As per Schedule 2 of the APA, the price of each of the assets is set out in Annexure-A of Schedule-2 to the APA. Thus, Annexure-A enlists the value of each of the individual assets transferred by the Applicant. Accordingly, the value of supply in the instant case shall be the value of each of the assets assigned in Annexure-A of Schedule-2 to the APA. Rate of tax applicable on sale of itemized assets. C.9. Before adverting to the rate of tax applicable on the sale of plant and machinery proposed by the Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be individual prices agreed for each of these goods in the Annexure-A of Schedule-2 to the APA which would be liable to tax individually, at the GST rate applicable to respective HSN. Prayers In view of the foregoing, it is prayed that this Hon'ble Authority be pleased to hold that: (a) The building to be transferred by the Applicant by way of sale under the APA is neither supply of goods nor supply of services in terms of Section 7 (2) (a) read with Entry 5 of Schedule III of the CGST Act and, hence, not taxable; and (b) The activity of assignment of leasehold rights under the APA is a supply of service, and is liable to GST at the price agreed for such assignment under the APA; and (c) The plant and machinery to be transferred under the APA constitutes supply of individual goods i.e., itemized sale of goods and is liable to GST on the prices specified for each item in Annexure-A of Schedule-2 to the APA, at the GST rate applicable to the respective HSN; and (d) Grant a personal hearing to the Applicant along with an authorized representative; (e) Permit the Applicant to file further / additional submissions in these proceedings; and (f) Pass such other order th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial or financial business area." This exemption is applicable only when upfront amount is received by State industrial corporations / undertakings. In case original buyer transfer the right to other person, this exemption notification is not applicable. Hence, the above said transaction (From GMPL to HMI) qualifies as a taxable supply of services under GST laws. It is covered in Schedule II by serial No. 2 (a) i.e-Any lease, tenancy, easement, licence to occupy land is a supply of services. A ii) Yes. GST would apply on the price agreed for transfer of Lease Hold Rights under the Asset Purchase Agreement. Q.B) Whether the transfer by way of sale of building by the Applicant to HMI in terms of the Asset Purchase Agreement qualifies as Neither a supply of goods nor a supply of services under Section 7 read with entry 5 of Schedule III of the GST Laws? Answer: No. The ownership of the construction on the leased land is not established with the lessee. Even if the possession of the construction is accompanied by a certificate of completion while returning the lease, it is considered a lease service and should be taxed accordingly. It is not possible to separate the two compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lease deed executed between MIDC & GMIPL, dated 03 July 2010. It contains A to D, 1, 2(a) to (z), 3, 4(a) to (c), once again 4. Actually it is to be 5(a) to (f), 6 to 14 and finally attached 3 schedules. Point 3 states about assignment to subsidiary, affiliate, group compliances. In this clause, applicability of transfer charges to be paid to MIDC is explained. As transaction concerned in present case is not followed in this clause, taxpayer has paid charges and also paid GST on reassignment of lease to HMI. Now at point No. 7: Delivery of possession after expiration or termination At the expiration or termination of this lease deed, the lessee shall deliver to the lesser, the demised premises not later than 3 months from the date of such expiration or termination. However, the lessee shall be entitled to remove all or part of the erections and buildings including any fixtures or equipment then standing or being on the demised parties without any additional payments to the lesser and without the consent of the lesser. Now here the taxpayer (GMIPL) can take stand that this is not expiration or termination, it is a re-assignment. But in general term, non-continuation smells a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for use by HMI for inter alia manufacturing and assembling automotive vehicles and parts distribution. HMI is an unrelated party under the applicable GST laws. 5.3 The Applicant entered into a Term Sheet dated March 13, 2023, with HMI, which provided for the key terms of the sale. The Term Sheet dated March 13, 2023, signed by the Applicant, Chevrolet Sales India Pvt. Ltd., (CSIPL) and HMI sets out the list of assets to be transferred by the Applicant and CSIPL to HMI along with the value of each asset then agreed, as per clause 9 of the Term Sheet. 5.4 Appendix A, B and C of the Term Sheet captured the details of individual asset prices at which each such asset is planned to be transferred to HMI by the Applicant. An aggregation or a summary of these individual asset prices was contained in Schedule 1 of the Term Sheet. 5.5 Further, the items of plant and machinery proposed to be sold were mentioned in Appendix-A (9765 items) of the Term sheet along with the price of each of the assets. The buildings proposed to be sold by the Applicant, were mentioned in Appendix-B (41 buildings in total) of the Term sheet with the construction date, area, and value of each of the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has transferred identified assets located at its Talegaon manufacturing facility to HMI on 29.12.2023. That these assets comprised of: a. Leasehold rights in land which were transferred by way of deed of assignment on 29.12.2023. That GST was also paid on such assignment of leasehold right. b. Plant and machinery were sold individually as per the price of each item and appropriate GST was paid on sale of such goods. c. Buildings which were owned by the Applicant were conveyed through separate deed of conveyance dated 29.12.2023. No GST was paid as applicant contended it to be neither supply of goods nor supply of services. The questions received before this Authority and the discussion and findings in respect of these questions are as below: 5.10 Whether assignment of Lease Hold Rights of land by the Applicant in terms of the Asset Purchase Agreement qualifies as taxable supply of services under GST Laws? If yes, whether GST would apply on the price agreed for transfer of Lease Hold Rights under the Asset Purchase Agreement? 5.10.1 In the context of aforesaid question relating to assignment of leasehold rights in land, the Applicant submits that the Maharashtra Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 7 (1A) read with Schedule II under the GST Act provides which of such supplies shall be treated as supply of goods or services. Paragraph 2 of Schedule II provides that with respect to transactions relating to land and buildings, any lease, tenancy, easement, license to occupy the land, letting out of a building including a commercial, industrial or residential complex for business or commerce is the supply of services. 5.10.5 In other words, benefits arising from land in the forms specified in paragraph 2 of Schedule II are not to be treated as transactions in immovable property but as the supply of service for the purpose of the GST Act. The Deed, therefore, confers upon the applicant no better title to the Demised Premises (the premises whose lease hold rights are transferred including land and building) than a service contract of lease. The applicant can, therefore, agree to transfer to the assignee (HMI), only its right to receive the service of the lease for the remaining period after obtaining prior approval of the lessor (MIDC). 5.10.6 In the instant case, the applicant agrees to transfer the lease rights with the approval of MIDC. After the approval from MIDC, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial Development Corporations or Undertakings and hence benefit of Entry No. 41 of exemption Notification is not admissible to the applicant as the condition of the said entry is not satisfied. Hence, Entry No. 41 of Notification No. 12/2017 is not applicable to the Applicant. 5.10.9 The activity of assignment is in the nature of agreeing to transfer one's leasehold rights. It does not amount to further sub-leasing, as the applicant's rights as per the Deed stands extinguished. Neither does it create fresh benefit from land other than the leasehold right. It is like a compensation for agreeing to do the transfer of the applicant's rights in favour of the assignee. It is a service classifiable under other miscellaneous service (SAC 999792) and taxable @ 18% under SI No. 35 of Notification No. 11/2017-CT (Rate) dated 28/06/2017. 5.10.10 In view of the above discussions, following inferences can be drawn. 1. The applicability of the General Clauses Act, 1897 in the context of a Special Act like the CGST Act, 2017, is limited to areas where no express provisions are made under the said Special Act. 2. Section 7 (1A) read with Schedule II under the GST Act provides which of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the leasehold. The transaction is not a transfer of leasehold as the applicant by the clauses of Lease deed executed with MIDC is not permitted to sublet/assign without the approval of MIDC. The activity of applicant as seen from the impugned agreement executed & the approval letter of MIDC, is only a transaction in which the applicant agrees to transfer the leasehold interests it possesses for the remaining lease period in favour of HMI with the approval of MIDC in respect of the land required by HMI. Therefore, the activity is not a transfer of leasehold rights by the applicant to HMI but is an activity of agreeing to transfer the leasehold interests that the applicant holds on the land to be leased to HMI by MIDC. The above, clearly establishes that the activity undertaken by the applicant in agreeing to transfer the interests of the leasehold rights in the land required by HMI for the furtherance of their business, against a consideration is an activity of 'agreeing to do an Act, which is a taxable service classifiable under 'Other Miscellaneous Services', with SAC 9997. 5. Since the applicant, apart from the conditional possession of the said Premises, enjoys no title or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 36, Schedule I to the Maharashtra Stamp Act, 1958, the present transaction is treated as a conveyance. Thus, such an instrument styled as conveyance and conveying a right, title and interest in the immovable property is brought into existence. Hence, the whole transaction is akin to sale. If that is the position, then, section 7 of the GST Act cannot have any application. Once the position in law is understood in this perspective, then, there is no warrant for imposition of the GST. Our attention is invited to Schedule II of the GST Act and some of the clauses therein to urge that if the intention of the legislation was to charge GST on this one-time lease premium, then, appropriate provisions would have been inserted. They not being inserted, as there was a clear intent to leave out a transaction tantamounting to a sale. Mr. Nankani attempted to point out that one-time lease premium is different and distinct from lease rent. It is not a periodical payment, but a one time. It is not, therefore, conceivable that on such a premium, the tax could be levied, assessed and recovered. The premium is akin to "Salami and our attention is invited to its plain dictionary meaning as set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find any good ground and reason to take a different view than the one expressed by the High Court. In view of this, the said judgement of Hon Bombay High Court is binding on this Authority. 5.10.12 Further, the question that, whether assignment/transfer of leasehold rights in land & structures standing thereon by the applicant would qualify as 'supply and liable to GST and if so, then under which section of GST Act has already been decided by the West Bengal Authority for Advance Ruling in case of M/s Enfield Apparels Ltd. In this case, it was held that the activity of assignment is in the nature of agreeing to transfer one's leasehold rights. It is in the nature of compensation for agreeing to do the transfer of the applicant's rights in favor of the assignee. It is a service classifiable under "Other miscellaneous service" (SAC 999792) and taxable @ 18%. Further similar view has been taken in UP Authority for Advance Ruling in case of M/s Fena Private Limited and in case of M/s Remarkable Industries Pvt Ltd, and by Tamil Nadu Authority for Advance Ruling in case of M/s. India Pistons Limited. 5.10.13 Further the applicant and the Jurisdictional Officer have both taken simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the determination of the lease remove, at any time whilst he is in possession of the property leased but not afterwards, all things which he has attached to the earth: provided he leaves the property in the state in which he received it:" Applicant infers that from a plain reading of the afore-quoted provision that the ownership of structures constructed on the land lie exclusively with the lessee. 5.11.5 Applicant submits that the essence of Section 108 of the TPA is also mirrored in Clause 7 of the Lease Deed dated 30.07.2010, which stipulates that the lessee (i.e. the Applicant) is entitled to remove all erections and buildings without any additional payments to and without the consent of MIDC. 5.11.6 We observe that Lease Deed dated 03.07.2010 is the basic lease contract which granted leasehold rights to the lessee, M/s GMI. Its clause no. 1 is reproduced as below. "1. In consideration of the sum of Rs. 8,00,00,000/- (Rupees Eight Crores Only) paid by the lessee in the manner provided under the Agreement to Lease to the Lessor which amount is further defined as "Premium Payment", more particularly specified hereinafter, as premium and of the rent hereby reserved and of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following properties. 1. Piece of land known as Plot No. A-16 in the Talegaon Industrial Area which is about 300 acres. 2. Currently standing buildings and erections. 3. Buildings and erections standing at any time hereafter and being thereon. Thus, the Lease Deed dated 03.07.2010 clearly stipulates that the 'lease' would be of 300 acres of plot of land together with the buildings and erections now or at any time hereafter and being thereon. The lease also includes any buildings and structures currently present or built in the future, along with all associated rights and access, except for any underground mines and minerals, which remain with the Lessor. As the lease' includes the lease of buildings, currently present or built in the future, the lessee holds only the leasehold rights towards the buildings and not the ownership rights of buildings built on leased land with the approval of MIDC. 5.11.8 In this context, it is necessary to go through the provisions of lease under the Transfer of Property Act, 1882. It defines a lease as below. Section 105 - Lease Defined "A lease of immovable property is a transfer of a right to enjoy such property, made for a certain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd subject to the lease conditions. 5.11.11 Accordingly, any claim by the lessee asserting ownership of the buildings constructed on leased land is untenable and contrary to the governing legal provisions and the express terms of the lease agreement. As the lessee does not have ownership over the buildings, there is no question of lessee making sale of such buildings. 5.11.12 We may further peruse following relevant terms of the lease deed dated 03.07.2010 to understand the nature of lease. 1. In consideration of the sum of Rs.8,00,00,000/- (Rupees Eight Crores Only) paid by the lessee in the manner provided under the Agreement to Lease to the Lessor which amount is further defined as "Premium Payment", more particularly specified hereinafter, as premium and of the rent hereby reserved and of the covenants and agreements on the part of the Lessee hereinafter contained the Lessor both hereby demise unto the Lessee ALL THAT piece of land known as Plot No. A-16 in the Talegaon Industrial Area and outside the limits of Pune Municipal Council, within the Village limits of Navlakh Umbre in Maval Taluka and Registration Sub-District, Vadgaon Maval District and Registration District Pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicles and related components and operations including, but not limited to assembly and manufacture of cars, trucks, engines, transmissions, axels, chassis, and other related parts and sub-assemblies, ancillary products, design, engineering, research activities and other related functions associated with the business activities of the Lessee in accordance with the MIDC Zoning regulations as may be applicable for the zone to which the Demised Premises relates, but not for the purpose of a factory for any of the obnoxious industries specified in the annexure set out in the Third Schedule hereunder written and not to use the Demised Premises or any part thereof for any other purpose nor for the purpose for any factory which may be obnoxious, offensive by reason of emission of odour liquid-effluvia, dust, smoke, gas, noise, vibrations or fire-hazards and shall duly comply with the directions which may from time to time be issued by the said Maharashtra Pollution Control Board with utmost promptitude for the purpose of preventing any air pollution by reason of any such emission of dour, liquid-effluvia, dust, smoke, gas or otherwise howsoever. (n) No building or structure to be erecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose contemplated in the lease-remains vested in the lessor. The agreement expressly provides that the lease of the land is solely for establishing a manufacturing facility for automotive engineering. 5.11.14 Consequently, the lease of the land and the construction of the buildings are deemed inseparable, with the buildings constituting an integral part of the leasing transaction. In the absence of any transfer of title to the leased land, the lessee is precluded from asserting ownership of the buildings and may only assign its leasehold interest therein. 5.11.15 When a lessor leases a parcel of land to a lessee with the permission to construct buildings, the legal ownership of the land remains with the lessor, and the lessee acquires only possessory rights over the land as per the terms of the lease agreement. The lessee may enjoy the right to use and occupy the buildings during the lease term but does not have the authority to transfer ownership of the buildings separately from the land. The lessee may, subject to the lease agreement, remove movable fixtures and certain attachments to the land before the lease expires, provided such removal does not cause damage to the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease. In this case, there is no end or lapsing of the lease agreement. Only, the new incumbent (HMI) is replacing the original lessee (GMI) in the lease for remaining tenure of the lease. The accretions on the plot of land have become part of the lease and it is only the leasehold rights of the plot including the structures on it is being assigned to new lessee (HMI) 3. The Applicant submits that the Letter of Consent issued by MIDC dated 26.12.2023 was limited to the interest in the lease. The first para of this letter of consent refers to the original Lease as 'Lease of above plot of land bearing Plot A-16 admeasuring 1213924 sq.m. and the building and erected thereon in the manner specified in the said Lease.' Consent for transfer and assignment of lessee's interest in the said Lease has been granted. 4. Deed of Assignment dated 29.12.2023- Recital C and recital G clearly describes the fact that ownership of the Structures on the Demised Premises lies with the Applicant. It is lease rights that have been acquired by the Applicant. His reference to having acquired ownership rights over buildings is contrary to the terms of Lease Deed dated 03.07.2010 and provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer is only in respect of Leasehold rights. What is received by the transferee is the Lease which includes plot of land and the structures on it. 5.11.18 The case of R.V. Bhupal Prasad Vs. State of Andhra Pradesh reported in (1995) 5 SCC 698 by the Supreme court deals with the right of lessee and land owners, particularly in the context of lease agreement and the ownership of structures built on the leased land. In the said case the agreement allowed the lessee to construct buildings on the leased land. The Supreme court held that during the lease term the lessee has the right to use and enjoy the structures built on the leased land as per the terms of the lease agreement. After the end of the lease term, the ownership of structures reverts back to the landowner, unless the lease agreement provides for a different arrangement. The rights and obligations of the lessee and landowner must be determined based on the specific provisions of the lease agreement. This shows that the lessee does not have complete and absolute ownership over the structures and has the right only to use and enjoy the same. Therefore, by merely issuing a conveyance deed by the lessee to a third party does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant and machinery in terms of the Asset Purchase Agreement qualifies as taxable supply of individual goods under GST Laws? If yes, whether GST would apply on the price agreed between the parties for the sale of each such items under the Asset Purchase Agreement, as per classification and rate applicable to each item? 5.12.1 The Applicant submits that the itemized sale of plant and machinery, at individually agreed prices, amounts to transfer of property in goods and falls within the ambit of Section 7 (1) (a) of the CGST Act, 2017. Thus, in view of the Applicant each item of plant and machinery is liable to tax at the applicable rate of tax that is notified vide Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 on the price agreed between the parties for the sale of each such item under the Asset Purchase Agreement. The reply filed on behalf of the Department endorses the position put forth by the Applicant. The Applicant has paid on sale of items of plant and machinery to HMI on prices agreed inter-se Hyundai India and the Applicant. 5.12.2 We observe that the sale of each identified item of plant and machinery under the APA amounts to individual taxable supply of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under Section 15, whichever is higher" In the light of the aforesaid provision, if the applicant has taken input tax credit on the said capital goods, the value of the goods shall be determined in terms of Section 18 (6) of the CGST Act, 2017. 6. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) For reasons as discussed in the body of the order, the questions are answered thus - Question 1:- Whether assignment of Lease Hold Rights of land by the Applicant in terms of the Asset Purchase Agreement qualifies as taxable supply of services under GST Laws? If yes, whether GST would apply on the price agreed for transfer of Lease Hold Rights under the Asset Purchase Agreement? Answer:- Yes, assignment of Lease Hold Rights of land by the Applicant in terms of the Asset Purchase Agreement qualifies as taxable supply of services under GST Laws. GST wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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