Appellate Court Rules Shared Access Pathway is Taxable License, Not Easement

The appellate court upheld the Original Authority's ruling that the shared access pathway provided by the appellant is classified as a license, not an easement. The transaction was deemed taxable under GST at a rate of 9% CGST and 9% SGST. The appellant's argument that the pathway access was inseparable from the sale and purchase of the land and exempt under Notification 12/2017 was rejected. The court determined that the grant of shared access constituted a right to occupy land, falling under SAC 999794.

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Issues Involved:
1. Taxability of leasing pathway access under GST.
2. Classification of the transaction as an easement or license.
3. Applicability of composite supply provisions.
4. Interpretation of relevant statutory provisions.

Issue-wise Analysis:

1. Taxability of Leasing Pathway Access under GST:
The appellant, a registered entity under GST, acquired land for public purposes and provided a shared access pathway to the original landowner for a consideration. The Original Authority ruled that this leasing of the pathway is taxable under GST. The appellant contested this decision, arguing that the pathway access was a covenant running with the land and inseparable from the sale and purchase of the land, which is not subject to GST. They also claimed that leasing residential property is exempt under Notification 12/2017.

2. Classification of the Transaction as an Easement or License:
The appellant argued that the right to pathway is an easement, which is ancillary to the sale of land and not a separate supply liable to GST. They cited Section 4 of the Indian Easement Act, 1882, defining an easement as a right for the beneficial enjoyment of land. However, the Authority found that the shared access granted for a specific period on payment of lease rentals does not constitute an easement but a license as per Section 52 of the Indian Easement Act, 1882. The pathway was used by both the appellant and the landowner, indicating no transfer of possession, which is essential for a lease under Section 105 of the Transfer of Property Act, 1882.

3. Applicability of Composite Supply Provisions:
The appellant contended that the transaction was a composite supply with the principal supply being the sale of land, which is exempt from GST. The Authority rejected this argument, stating that the sale of land and the grant of shared access are two separate transactions involving different suppliers and recipients. Therefore, it does not qualify as a composite supply under GST law.

4. Interpretation of Relevant Statutory Provisions:
The Authority referred to Schedule II of the CGST/TNGST Act, which categorizes any lease, tenancy, easement, or license to occupy land as a supply of services. The appellant's interpretation that only transfers involving possession are covered was dismissed. The Authority clarified that the right to use the space without transferring possession still constitutes a right to occupy. Consequently, the shared access granted by the appellant is classified as a license to occupy land, making it a taxable service under SAC 9997.

Conclusion:
The Authority concluded that the shared access pathway granted by the appellant is not an easement but a license, and the activity is an "act of agreeing to tolerate an act," classifiable under SAC 999794. This transaction is taxable under GST at the rate of 9% CGST and 9% SGST. The appeal was disposed of accordingly, upholding the Original Authority's ruling.

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