Taxable lease of developed plots by a private developer attracts GST; exemption for government industrial leases was unavailable.

Consideration collected by a non-government developer from its members for allotment and long-term lease of developed plots was held taxable as consideration for supply of service under GST, because lease of land remains a service and the transaction did not become a sale merely due to stamp duty or contemplated transfer of rights. The exemption in Entry No. 41 of Notification No. 12/2017 was denied because the applicant was not the specified government industrial development corporation or undertaking, and the amount recovered was not the exempt upfront lease amount. GST liability was held to arise from 1.7.2017, and statutory interest followed as a consequence of delayed payment.

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Issues: (i) Whether the consideration collected by the applicant from its members towards development cost for allotment/lease of plots amounted to a taxable supply under the GST law; (ii) whether the said consideration was exempt under Entry No. 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017; and (iii) whether GST liability and statutory interest arose from 1.7.2017.

Issue (i): Whether the consideration collected by the applicant from its members towards development cost for allotment/lease of plots amounted to a taxable supply under the GST law.

Analysis: The applicant was a company engaged in developing a gems and jewellery park and was leasing developed plots to members for consideration. Lease of land is treated as supply of services under the GST framework, and the activity of providing plots and related facilities to members falls within the statutory concept of business. The character of the transaction remained leasing service and was not converted into a sale merely because stamp duty was paid on the lease deeds or because eventual transfer of rights was contemplated.

Conclusion: The consideration collected from members was taxable as consideration for supply of service.

Issue (ii): Whether the said consideration was exempt under Entry No. 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Analysis: The exemption under Entry No. 41 applies to upfront amounts in respect of long-term lease of industrial plots provided by a State Government industrial development corporation or undertaking, or by an entity having the prescribed government ownership. The applicant was neither such a corporation nor such an undertaking, and the consideration recovered from members was not the exempt upfront amount contemplated by the notification. The exemption was therefore not available on a plain reading of the entry, which had to be construed strictly.

Conclusion: The exemption under Entry No. 41 was not available to the applicant.

Issue (iii): Whether GST liability and statutory interest arose from 1.7.2017.

Analysis: The liability to tax was held to arise from the inception of GST, and the subsequent insertion of clause (aa) in section 7(1) was treated as clarificatory and fortifying the existing position. Once tax was found payable from 1.7.2017, interest followed as a statutory consequence of delayed payment.

Conclusion: GST liability arose from 1.7.2017 and statutory interest was payable.

Final Conclusion: The applicant's receipts from members for development of the park were held taxable under GST, no exemption under the cited notification was granted, and interest liability was affirmed from the commencement of GST.

Ratio Decidendi: A long-term lease or allotment of plots by a non-government developer to its members for consideration is a taxable supply of service, and exemption notifications must be applied strictly only when their conditions are fully satisfied.

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