LEASE OF INDUSTRIAL PLOT FOR 99 YEARS CONSTITUTES SUPPLY OF SERVICE UNDER GST, TAXABLE AT 18% UNDER HSN 997212

LEASE OF INDUSTRIAL PLOT FOR 99 YEARS CONSTITUTES SUPPLY OF SERVICE UNDER GST, TAXABLE AT 18% UNDER HSN 997212

RAJASTHAN AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Case Title- M/s Greentech Mega Food Park Pvt. Ltd.

(GST AAR RAJASTHAN)

Advance Ruling No. RAJ/AAR/2019-20/10

Date of Judgment/Order- 28th May 2019

IMPORTANT PARAGRAPHS

Para No. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT:

(d) That the applicant Company wishes to enter into lease agreements with several lessees for a total period of 99 years for separate industrial units situated at Greentech Mega Food Park, Village Roopangarh in Ajmer (Rajasthan) for a consideration towards booking and allotment of developed plot. The entrepreneurs can pay either immediately or within a mutually agreed upon period along with interest.

Para No. 2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT

(a) Whether the Lease Agreement between the Applicant Company i.e. the lessor and the Lessee for a period of 99 years is a Sale of immovable property and outside GST and is exempt from levy of GST?

(b) If the present transaction of giving land on lease of 99 years is taxable under GST, then at what rate and what HSN Code is applicable?

Para No. 4. COMMENTS OF THE JURISDICTIONAL OFFICER

(a) The applicant is a person and in the course or in furtherance of its business, it disposes of lands by leasing them out for a consideration as one-time premium or periodic premium as per convenience. Therefore, if one refers to Schedule Il, section 7, then any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential complex for business, either wholly or partly is a supply of service. The substantive provisions and the Schedule treat the activity as supply of goods or supply of services, particularly in relation to land on a lease, then, the consideration therefore as a premium/one-time premium is a measure on which the tax shall be levied.

Para No. 5. FINDINGS, ANALYSIS & CONCLUSION:

(f) Further, the Schedule Il of GST Act, 2017 specify that lease of a industrial place or building is a supply, the relevant portion is reproduced hereunder:-

2. Land and Building

(a) any lease, tenancy, easement, licence to occupy land is a supply of services;

(b) any tease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

RULING

In view of the foregoing, we rule as follows:-

The Lease Agreement between the Applicant i.e. the lessor and the Lessee for a period of 99 years is a Lease Agreement of immovable property classifiable under HSN 9972 and attracts GST @18% (SGST 9% + CGST 9%).