Transfer of 99-year leasehold rights in Noida land constitutes taxable service under GST Act Schedule II

The AAR, UP held that transfer of leasehold rights in land allotted by Noida Authority constitutes supply of services under GST Act. The applicant transferred 99-year lease rights to another company for Rs. 6,60,00,000. The ruling determined this activity falls under Schedule II, Paragraph 2 of CGST Act 2017, classifying it as service rather than sale of immovable property. The transfer involves compensation for agreeing to transfer leasehold rights, not creating fresh land benefits or sub-leasing. GST is payable at 18% under "Other miscellaneous service" classification, as the applicant holds no ownership title but only conditional possession rights.

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Issues Involved:
1. Whether the transfer of leasehold rights falls within the ambit of supply as defined under Section 7 of the CGST Act.
2. Whether GST is payable on the transfer of leasehold rights for the consideration received.
3. Eligibility of input tax credit for the recipient of the leasehold rights.

Summary:

Issue 1: Transfer of Leasehold Rights as Supply
The applicant sought clarification on whether the transfer of leasehold rights in respect of Noida Authority allotted land to M/s S.K. Food Equipments Pvt. Ltd. would fall within the ambit of "supply" as defined under Section 7 of the CGST Act, 2017. The ruling clarified that the scope of supply under Section 7(1) includes all forms of supply of goods and services, including lease. Paragraph 2 of Schedule II specifies that any lease, tenancy, easement, or license to occupy land is a supply of services. Therefore, the transfer of leasehold rights by the applicant is considered a supply of service under the GST Act.

Issue 2: GST Payable on Transfer of Leasehold Rights
The applicant questioned whether GST is payable on the transfer of leasehold rights for the consideration of Rs. 6,60,00,000/- received from M/s S.K. Food Equipments Pvt. Ltd. The ruling confirmed that the transfer of leasehold rights is a service classifiable under Other Miscellaneous Services (SAC 999792) and is taxable at 18% under SI.No. 35 of Notification No. 11/2017-CT (Rate) dated 28/06/2017. Therefore, GST is payable on the transfer of leasehold rights for the consideration received.

Issue 3: Eligibility of Input Tax Credit
The applicant sought clarification on the eligibility of input tax credit for M/s S.K. Food Equipments Pvt. Ltd. on the transfer of leasehold rights. The ruling stated that comments could not be offered on this issue as it pertains to the recipient of the service, and the application for advance ruling was not admitted for this question.

Conclusion:
The transfer of leasehold rights by the applicant to M/s S.K. Food Equipments Pvt. Ltd. falls within the ambit of supply as defined under Section 7 of the CGST Act, and GST is payable on the consideration received for such transfer. The eligibility of input tax credit for the recipient was not addressed in the ruling. 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.

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