Long-term commercial lease premium treated as taxable service under GST, not as exempt sale of building.

A long-term lease of completed commercial units, supported by a lease deed and assignment deed, was treated as a supply of services because it conferred only leasehold rights for a fixed term, with annual rent, transfer restrictions and reversion on expiry. The one-time premium paid on allotment was therefore consideration for a taxable supply under GST and did not qualify as a non-taxable sale of building under Schedule III. The supply was further classified as a real estate service under SAC 9972, attracting the GST rate prescribed for that heading, namely 18% split equally between CGST and SGST.

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Issues: (i) Whether the one-time premium received on allotment of completed commercial units by way of a 90-year lease is a taxable supply under GST. (ii) If taxable, what is the applicable rate of tax.

Issue (i): Whether the one-time premium received on allotment of completed commercial units by way of a 90-year lease is a taxable supply under GST.

Analysis: The transaction was examined on the basis of the lease deed and the deed of assignment. The arrangement conferred only leasehold rights for a fixed period, with continuing annual rent, restrictions on use and transfer, and reversion of rights on expiry. Under section 7 of the CGST Act, supply includes lease and rental transactions for consideration. Schedule II treats lease or letting out of building for business or commerce as a supply of services. Schedule III applies only to sale of land and sale of building, and the arrangement in question was not a sale but a lease. The one-time premium was therefore consideration for a taxable supply of services and not for a non-taxable sale of building.

Conclusion: The one-time premium is taxable supply under GST and the conclusion is against the assessee.

Issue (ii): If taxable, what is the applicable rate of tax.

Analysis: The supply was classified as a real estate service under SAC 9972 under Notification No. 11/2017-Central Tax (Rate). On that classification, the applicable rate was the rate prescribed for heading 9972.

Conclusion: The supply is taxable at 18%, comprising 9% CGST and 9% SGST, and this conclusion is against the assessee.

Final Conclusion: The ruling holds that the long-term lease premium for completed commercial units is a taxable service and is taxable under the real estate services classification at the prescribed GST rate.

Ratio Decidendi: A long-term lease of commercial premises with recurring rent and restrictive leasehold rights is a supply of services under GST and does not fall within the exemption for sale of building under Schedule III.

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