2019 (6) TMI 1009 - AAR - GST

Leasing of plots for public amenities exempt from GST; residential construction for officials taxable at 18%

The court held that the leasing of plots by City and Industrial Development Corporation of Maharashtra Limited (CIDCO) to Navi Mumbai Municipal ... Applicability of notifications - Classification of supply of services - pure services - transfer by way of lease of vacant plots of ‘Maharashtra State Government owned lands or of privately owned lands acquired under the Land Acquisition Act, 1894 by the Maharashtra State Government vested in CIDCO - transfer to Navi Mumbai Municipal Corporation(‘NMMC’) for the purpose of development and construction of Indoor Recreation Centre and Slaughter House - transfer to Panvel Municipal Corporation for the purpose of development and transfer of PMC Ward Office, PMC Commissioner’s residence and PMC Mayor’s residence. Whether the the supply of services would be covered within the scope of entry at Sr. No. 3 or any other entry of the Notification No. 12/2017-CentraI Tax (Rate) dated 28.062017 as amended by Notification No. 32/2017-CentraI Tax (Rate) dated 13.10.2017, 47/2017-central Tax (Rate) dated 14.11.2017 further amended by Notification No. 02/2018-CentraI Tax (Rate) dated 25.01.2018 read with parallel notifications issued under the MGST Act, 2017? HELD THAT:- CIDCO is clearly covered under the definition of ‘Government Entity’ since it is constituted and established by the State Government of Maharashtra with 100% participation by way of Equity or Control to carry out the function of development of new township of New Bombay. Hence in the subject case we continue to hold that the applicant can be considered as a ‘Government Entity’ - also NMMC and PMC are Municipal Corporations which satisfy the definition of a ‘local authority’ as defined in Section 2 (69) of the CGST Act. As per Sr.No 2 (a) of Schedule II of the CGST Act, ‘any lease, tenancy, easement, licence to occupy land is a supply of services’. Hence, any supply which is either deemed as services under Schedule II of CGST Act or which are not covered under the definition of goods shall be categorized as pure services. However, as per the above mentioned notification, works contract services or other composite supplies involving supply of any goods are not covered in Sr. No. 3 - Since we find that the said supply is in the form of Pure Services then Sr. No, 3 of the Notification No. 12/ 2017-Central Tax (Rate) dated 28.06.2017 comes into play in the subject case. Lease of plots to NMMC for Indoor Recreation Centre - HELD THAT:- An Indoor Recreation Centre can be considered as a kind of amenity which is given to the public by the local authority for recreation and the same would be similar to amenities provided by the Municipalities in their jurisdiction - the plots are leased by the applicant (a kind of pure services), to a Municipality i.e. a local authority in relation to a function entrusted to such Municipality under Article 243W of the Constitution and would be exempt as per Sr. No. 3 of Notification No. 12/2017-CentraI Tax (Rate) 28.06.2017. Lease of plots to NMMC for slaughter house - HELD THAT:- Sr. No 18 of the 12th Schedule under Article 243W is with respect to ‘Regulation of Slaughter Houses and Tanneries’ Hence plots leased by the applicant (a kind of pure services), to a Municipality i.e. a local authority for setting up Slaughter Houses can be perceived to be in relation to a function entrusted to such Municipality under Article 243W of the Constitution (‘Regulation of Slaughter Houses and Tanneries ) and would be exempt as per Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Lease of plots to PMC for PMC ward office - HELD THAT:- PMC is a Municipal Corporation, a local authority. Article 243 W of the Constitution of India has endowed Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government - In the absence of the establishment by way of a Ward Office, PMC would find it impossible to function. The said services would be exempt as per Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Lease of plots to PMC for PMC's Commissioner's and Mayor's residences - HELD THAT:- Construction of residence for officials cannot be considered to be a function envisaged under Article 243 W of the Constitution of India - We do not agree with the applicant’s contention that the leasing of land for construction of building for use as PMC Commissioner’s and PMC Mayor’s residences falls within the scope of Entry 2 of Twelfth Schedule to the Constitution of India relating to “Regulation of land-use and construction of buildings” or within the scope of any of the Entries of the Twelfth Schedule to the Constitution of India - Even construction of residential complex predominantly meant for self use or use of the employees of Central Government, State Government, Union Territory, a local authority or a governmental authority is liable to GST. Issues Involved:1. Classification of the leasing of plots to Navi Mumbai Municipal Corporation (NMMC) and Panvel Municipal Corporation (PMC).2. Applicability of GST exemption under Notification No. 12/2017-Central Tax (Rate) for various uses of leased plots.Issue-wise Detailed Analysis:1. Classification of Leasing of Plots:The applicant, City and Industrial Development Corporation of Maharashtra Limited (CIDCO), sought an advance ruling on whether the leasing of vacant plots to NMMC and PMC for specific uses falls under the scope of Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).2. Applicability of GST Exemption:The key question was whether the leasing of plots for specific uses is exempt from GST under the said notification.Lease of Plots to NMMC for Indoor Recreation Centre:The indoor recreation centre, consisting of a gymnasium, swimming pool, and play courts, accessible to the public for a nominal fee, is considered a public amenity. This falls under Sr. No. 17 of the 12th Schedule of Article 243W of the Constitution, relating to public amenities. Therefore, the leasing of plots for this purpose qualifies as 'pure services' provided to a local authority and is exempt from GST under Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate).Lease of Plots to NMMC for Slaughter House:The regulation of slaughterhouses is covered under Sr. No. 18 of the 12th Schedule of Article 243W. Hence, leasing plots for setting up slaughterhouses is considered a function entrusted to a Municipality and is exempt from GST under Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate).Lease of Plots to PMC for Ward Office:PMC, being a local authority, requires ward offices to perform its functions under Article 243W. The leasing of plots for ward offices is necessary for the execution of PMC's functions and is exempt from GST under Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate).Lease of Plots to PMC for Commissioner’s and Mayor’s Residences:The construction of residences for the PMC Commissioner and Mayor is not considered a function under Article 243W. These are for personal use and not for performing official duties. Therefore, the leasing of plots for these residences does not qualify for GST exemption and is taxable at 18% under Chapter Heading 9972, Sr. No. 16, clause (iii).Conclusion:The supply of services by CIDCO, by way of leasing plots to NMMC for an indoor recreation centre and slaughterhouse, and to PMC for ward offices, is exempt from GST. However, leasing plots to PMC for the Commissioner’s and Mayor’s residences is taxable at 18% GST.