Lease premium exemption under GST failed where industrial plot and government control conditions were not cumulatively established.

Exemption under entry 41 of Notification No. 12/2017-Central Tax (Rate) for upfront premium on a 30-year land lease was available only if all prescribed conditions were met. The record did not establish that the leased plot was an industrial plot used in the manner contemplated by the notification, and the allotment materials indicated GST was payable on the premium rather than exempt. The requirement that the lessor be owned or controlled by the Central Government to the extent of at least 20 per cent was also not satisfied, because the port authority's Board had the relevant administrative and financial powers and central oversight was only supervisory.

---

---

Issues: Whether the upfront premium paid for a 30-year lease of land granted by SMPK for setting up a commercial office complex qualified for exemption under entry 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, particularly on the questions whether the leased land satisfied the prescribed industrial plot condition and whether SMPK satisfied the ownership/control condition.

Analysis: The exemption was found to be conditional and required all stipulated requirements to be met. Although the lease period of thirty years and the recipient's status as an industrial unit were not in dispute, the record did not establish that the plot was used in an industrial or financial business area in the manner contemplated by the notification. The allotment letter and tender conditions indicated payment of GST on the upfront premium and did not record the exemption condition required by the notification. On the supplier side, the material showed that SMPK functioned as an autonomous port authority with administrative and financial powers vested in its Board, while the Central Government exercised only supervisory powers in limited situations. Audit by the Comptroller and Auditor-General and governmental oversight did not by themselves establish the requisite 20 per cent or more ownership or control by the Central Government.

Conclusion: The conditions for exemption under entry 41 were not cumulatively satisfied, and the lease premium was not eligible for exemption.

---