GST Applicable to Security Deposit as First Installment in Lease Premium

The authority held that the 99-year lease agreement between the applicant company and RLDA is not exempt from GST. The amount transferred as a security deposit was deemed the first installment of the lease premium and therefore subject to GST. Additionally, the amount deposited in February 2019 was not exempt from GST as it did not fall under the relevant notification.

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Issues Involved:
1. Whether the lease agreement between the applicant company and RLDA for 99 years is exempt from GST.
2. Whether the amount of Rs. 158,657,105 transferred as a security deposit is exempt from GST.
3. Whether the amount of Rs. 158,657,105 deposited in February 2019 is exempt from GST.

Detailed Analysis:

Issue 1: Lease Agreement Exemption from GST
The applicant entered into a lease agreement with RLDA for 99 years for residential and commercial development. The applicant contended that the lease agreement is exempt from GST under Notification No. 04/2019-Central Tax (Rate) dated 29.03.2019 and Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. However, the authority found that RLDA, being a statutory authority, provides rental or leasing services involving own land, classifiable under HSN 9972, attracting GST @ 18%. The lease agreement does not fulfill the conditions for exemption under the cited notifications, as RLDA leased ordinary plots for residential purposes, not industrial plots or plots for financial business development. Therefore, the lease agreement is not exempt from GST.

Issue 2: Security Deposit Exemption from GST
The applicant argued that the amount of Rs. 158,657,105 transferred as a security deposit is exempt from GST. However, the authority concluded that this amount is not a security deposit but the first installment of the lease premium, as per the lease agreement and the financial bid. The lease premium is a consideration for leasing services supplied by RLDA, and thus, it is liable to GST. The authority emphasized that the payment of the lease premium was made after the issuance of the Letter of Acceptance (LoA) and the deposit of the bid security amount. Consequently, the amount transferred as the first installment of the lease premium is not exempt from GST.

Issue 3: Exemption for Amount Deposited in February 2019
The applicant contended that the amount deposited in February 2019 should be exempt under Notification No. 04/2019-Central Tax (Rate) dated 29.03.2019. However, the authority found that the notification applies to upfront amounts payable on or after 01.04.2019, whereas the amount in question was deposited in February 2019. Additionally, the "Time of Supply of Services" under Section 13(3) of the CGST Act, 2017, indicates that the GST liability and point of taxation are applicable in February 2019. Therefore, the amount deposited in February 2019 is not exempt from GST under the cited notification.

Conclusion:
The authority ruled that:
1. The lease agreement for 99 years is not exempt from GST.
2. The amount of Rs. 158,657,105 transferred as a security deposit is not exempt from GST.
3. The amount of Rs. 158,657,105 deposited in February 2019 is not exempt from GST.

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