SMPK land leasing services for industrial purposes not exempt from GST under Notification 12/2017 entry 41

AAR West Bengal ruled that services of leasing land for industrial purposes by SMPK to applicant do not qualify for GST exemption under entry 41 of Notification No. 12/2017-Central Tax (Rate). The Authority held that SMPK cannot be regarded as an entity with 20% or more Central Government ownership merely because its accounts are audited by CAG or it is registered as tax deductor under GST Act section 51. Therefore, the upfront premium payable for land leasing services is not exempt supply and attracts GST.

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Issues Involved:
1. Whether the upfront premium payable by the applicant towards the services of leasing of the land for industrial purposes by SMPK is exempted under entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017Rs.

Summary:

Issue 1: Exemption of Upfront Premium under GST Notification
The applicant entered into a leasing agreement with SMPK for an industrial plot for 30 years, paying an upfront lease premium of Rs. 39,00,11,000/-. The applicant contended that this upfront lease premium should be exempt from GST under entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. The applicant argued that all conditions for exemption were met: the lease period is 30 years, the property is an industrial plot, SMPK is a government-controlled entity, and the applicant is an industrial unit.

Revenue's Submission:
Revenue acknowledged the lease period and SMPK's status but emphasized that the land must be used for industrial or financial activities in an industrial or financial business area. The applicant failed to provide evidence that the leased plot was in such an area or that the commercial office complex would involve industrial activities.

Authority's Observations and Findings:
The Authority examined whether SMPK qualifies as a supplier under the relevant GST notification. SMPK clarified that it is an autonomous body under the Ministry of Ports, Shipping, and Waterways, with no direct ownership by the Central Government. SMPK's books are audited by the CAG, but this does not equate to government ownership. The Authority concluded that SMPK does not meet the criteria of having 20% or more ownership by the Central Government as required by the notification.

Ruling:
The upfront premium payable by the applicant for leasing the land from SMPK is not exempt under entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. Therefore, the supply cannot be treated as an exempt supply.

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