2024 (3) TMI 44 - AAR - GST

AAR rejects advance ruling application for completed SIPCOT leasehold rights transfer under Section 95(a) CGST Act 2017

The AAR-TN held that an advance ruling application was not maintainable regarding a completed transaction involving transfer of SIPCOT's leasehold rights. ... Advance ruling applicability - Completed transaction rule for advance ruling - Advance ruling under Section 95(a) - Supply in relation to transfer of leasehold rights - GST exemption for long term lease under Entry No. 41 of Notification No. 12/2017 CT - Binding effect of advance rulingAdvance ruling applicability - Completed transaction rule for advance ruling - Advance ruling under Section 95(a) - Whether the Advance Ruling application was maintainable where the underlying transfer of leasehold rights had been completed prior to filing the application. - HELD THAT: - The Authority found from the documentary record that the Memorandum of Understanding was executed on 19.09.2021, SIPCOT's approval for transfer was dated 30.03.2022, and the entire consideration had been received by 07.05.2022, whereas the advance ruling application was filed on 29.12.2022. Advance rulings, as defined by Section 95(a), are intended to address matters in relation to supplies 'being undertaken or proposed to be undertaken' by the applicant. Given that the financial and transferal steps in the transaction were completed before the filing of the application, the transaction was no longer prospective or proposed at the time of application. Accordingly, the Authority held that the application sought a ruling on a completed transaction and therefore was not admissible for determination by an advance ruling. The Authority accordingly refrained from answering the questions on taxability and classification raised by the applicant. [Paras 8, 9]Application for advance ruling is not maintainable because the transaction was completed before filing; the Authority refrains from pronouncing any ruling on the matter.Final Conclusion: The Authority declined to answer the applicant's questions on taxability and classification because the transfer of leasehold rights had been completed prior to filing the advance ruling application; the application was therefore inadmissible under the principle that advance rulings apply only to supplies being undertaken or proposed. Issues Involved:1. Whether the subsequent transfer of SIPCOT's allotted leasehold rights in the land constitutes a 'Supply' under Section 7 of the Goods and Services Act, 2017.2. If yes, what will be the HSN/SAC code and GST RateRs.Summary:Issue 1: Whether the transfer constitutes a 'Supply' under Section 7 of the Goods and Services Act, 2017The applicant, a GST registrant, sought an advance ruling on whether the transfer of leasehold rights in land from the applicant to M/s. Kanta Flex (India) Private Limited falls within the ambit of 'Supply' as defined under Section 7 of the CGST Act, 2017. The applicant argued that the transaction should be considered a sale of land, falling under Entry No. 5 of Schedule III of the CGST Act, 2017, which deals with 'Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services'. The applicant relied on precedents such as the case of Commissioner of Income Tax Vs. M/s. Rane Brake Lining Ltd., where the Hon'ble Madras High Court held that a lumpsum amount paid does not make a permanent lease any less an alienation than a sale.Issue 2: HSN/SAC code and GST RateThe concerned 'CENTER' authority stated that the transaction is not the transfer of leasehold rights of land as claimed by the applicant, but rather the transfer of interest, i.e., agreeing to part with the interest on the leasehold land held by the applicant to the buyer on receipt of consideration. The activity undertaken by the applicant for which a consideration of Rs. 1.24 crores was received is an activity of 'agreeing to do an act', taxable under 'Other Miscellaneous Services' with SAC 9997. The 'STATE' authority did not furnish any reply, implying no pending proceedings on the issue raised by the applicant.Discussion and AnalysisThe Authority for Advance Ruling (AAR) noted that the financial transactions relating to the issue were completed before the filing of the application. The Memorandum of Understanding between the applicant and M/s. Kanta Flex was dated 19.09.2021, SIPCOT's approval for the transfer was dated 30.03.2022, and the final payment was made by 07.05.2022. The AAR emphasized that 'Advance Ruling' is intended for issues of ambiguous nature that are to be undertaken or proposed to be undertaken by the applicant, as per Section 95(a) of the CGST Act, 2017.RulingThe Authority concluded that the applicant cannot seek an advance ruling on a completed transaction, as laid down in Section 95(a) of the CGST Act, 2017. Therefore, the authority refrains from giving any ruling on the taxability and classification of the completed transaction.