Company denied GST advance ruling on lease premium as only suppliers can apply under Section 95

The AAR, Uttar Pradesh dismissed an application filed by a company seeking advance ruling on GST liability for upfront lease premium paid to NOIDA Authority for 90-year commercial plot lease. The Authority held that only suppliers can file advance ruling applications under Section 95 of CGST Act 2017. Since the applicant was a service recipient, not a supplier, the application was rejected without considering the merits regarding whether the long-term lease constituted supply of goods or services under GST provisions.

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Issues Involved:
1. Liability to pay tax under Reverse Charge Mechanism (RCM) on the upfront amount charged by NOIDA Authority.
2. Whether long-term lease is in the nature of sale of land and outside the scope of supply under CGST Act.

Summary:

Issue 1: Liability to pay tax under Reverse Charge Mechanism (RCM)

The applicant, M/s Lavish Buildmart Pvt. Ltd., sought an advance ruling on whether they are liable to pay tax under RCM on the upfront amount charged by NOIDA Authority as lease premium for a long-term lease of ninety years for commercial infrastructure development.

The applicant argued that NOIDA Authority does not qualify as a Central/State Government, Union Territory, or local authority under the CGST Act. They cited various judgments and statutory provisions to support their claim that NOIDA Authority is not a 'Government' or 'Local Authority' and thus, services provided by NOIDA Authority should not fall under RCM Notification SI No 5 and 5A. They also claimed that the transaction of long-term lease is a sale of land, which is not taxable under GST.

Issue 2: Nature of Long-term Lease

The applicant contended that the long-term lease is a transaction for the sale of land and should not be treated as a supply of service under GST. They referred to Schedule III of the CGST Act, which states that the sale of land is neither a supply of goods nor services and thus not taxable under GST. They also cited CBIC Circular No 101/20/2019-GST, which clarifies that upfront amounts payable for long-term leases are exempt from GST if determined upfront.

Discussion and Finding:

The Authority for Advance Ruling examined whether the issues raised fall under Section 97(2) of the CGST Act. It was found that the applicant, being a recipient of services, does not qualify to seek an advance ruling as per Section 95 of the CGST Act, which implies that only suppliers of goods or services can apply for advance rulings.

The authority concluded that M/s Lavish Buildmart Pvt. Ltd., as a service recipient, does not fall under the definition of a supplier and thus cannot seek an advance ruling.

Ruling:

No ruling can be given in the matter as the applicant does not qualify as a supplier under the Advance Ruling provisions.

Validity:

This ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.

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