2019 (2) TMI 1002 - AAR - GST

Ruling: Leasing immovable property & agricultural support services = 'Mixed Supply' under CGST/HGST Act, 2017.

The authority ruled that the services provided by the applicant, involving leasing of immovable property and support services in relation to agricultural ... Mixed Supply - Leasing of immovable property as supply of services - Storage and warehousing services for agricultural produce - Tax rate determination under section 8(b) of the CGST Act - Classification under GST rate notifications (support services for agriculture vs renting/real estate services)Mixed Supply - Leasing of immovable property as supply of services - Storage and warehousing services for agricultural produce - Tax rate determination under section 8(b) of the CGST Act - Classification of services provided by the applicant under the PEG-2008 scheme (lease with services) and consequent GST liability. - HELD THAT: - The Authority examined the agreements and scheme terms and found that the applicant supplies both renting/leasing of godowns (real estate services corresponding to SAC 997212) and support services in relation to agricultural produce (storage/warehousing). The contract permits use of the premises for stocks other than wheat and the two types of services are capable of being provided independently and are not naturally bundled in the ordinary course of business. Consequently the supply falls within the definition of Mixed Supply under section 2(74) of the Act. The notifications granting exemption are limited to services strictly in relation to agricultural produce and cultivation as defined in the relevant explanations; renting/leasing of godowns for commercial use is not covered by those exemptions. Applying the rule in section 8(b) of the Act, the mixed supply attracts the rate of tax applicable to the component with the highest applicable rate, namely the renting/leasing/real estate service (SAC 997212) which is taxable at the applicable 18% rate (9% CGST + 9% HGST). [Paras 24, 25, 26, 27]The services constitute a Mixed Supply and attract GST at the rate applicable to SAC 997212, i.e., 9% CGST + 9% HGST (total 18%).Final Conclusion: The Advance Ruling holds that services rendered by the applicant under the PEG-2008 'lease and services' arrangement are a Mixed Supply and are taxable at the rate applicable to renting/real estate services (SAC 997212), namely 9% CGST + 9% HGST (18% aggregate). Issues Involved:1. Applicability of GST on leasing of godowns under the PEG-2008 scheme.2. Classification of services provided under the PEG-2008 scheme.3. Nature of services provided (whether mixed supply).4. Tax rate applicable to the services provided.Issue-wise Detailed Analysis:1. Applicability of GST on leasing of godowns under the PEG-2008 scheme:The applicant sought an advance ruling on whether GST is exempt or applicable on the Private Entrepreneurs Godowns built under the PEG-2008 scheme of the FCI and leased out to the Nodal Agency (UPSWC) on 'Lease and services basis' for the storage of FCI's food grain stocks (Wheat). The Deputy Excise & Taxation Commissioner, Sirsa, clarified that renting/leasing of immovable property is a supply of services under section 7 of the HGST Act, 2017, and thus taxable. The applicant argued that under the Service Tax regime, they were reimbursed for service tax by FCI/HAFED, and they believe the nature of taxation remains unchanged under the GST regime.2. Classification of services provided under the PEG-2008 scheme:The services provided by the applicant fall under two categories: 'Lease only basis' and 'Lease and Services basis.' The present case falls under the 'Lease and Services basis,' where the private investor manages storage, preservation, and warehousing of the stocks under the supervision of the Nodal Agency. The applicant referred to a letter from FCI clarifying that agreements under 'Lease with Services Basis' are considered 'Storage and Warehousing Services,' which are exempt from GST.3. Nature of services provided (whether mixed supply):The authority examined whether the services provided by the applicant constitute a 'Mixed Supply' under section 2 (74) of the CGST/HGST Act, 2017. The applicant provides both support services in relation to agricultural produce and Real Estate Services (leasing of immovable property). Since these services can be provided independently and are not naturally bundled, they are treated as 'Mixed Supply,' attracting the highest rate of tax applicable to any one of the supplies.4. Tax rate applicable to the services provided:The relevant notifications and service codes were analyzed to determine the applicable tax rate. The service code 997212 for renting or leasing services involving non-residential property attracts 18% GST. Since the applicant's services are classified as 'Mixed Supply,' they attract the highest applicable tax rate, which is 18% (9% CGST + 9% HGST).Ruling:The authority ruled that the services provided by the applicant, i.e., leasing of immovable property and support services in relation to agricultural produce, are in the nature of 'Mixed Supply' as per section 2 (74) of the CGST/HGST Act, 2017. Consequently, these services attract a tax rate of 18% (9% CGST + 9% HGST) as applicable to SAC 997212. The ruling was ordered to be communicated accordingly.