GST on leased land

[Kaustubh Karandikar]

XYZ Pvt. Ltd. Wants to buy land on lease from Maharashtra Industries Development Corporation (MIDC).

1) Will the MIDC charge GST against this purchase?

2) Is XYZ required to pay GST on it under reverse charge?

[Rajagopalan Ranganathan]

Sir,

The answer to Q.1 is yes.

Q.2: - If MIDC is a Governmental entity then XYZ is required to pay gst under reverse charge. According to para 2 (zfa) of Notification No. 12/2017- Central Tax (Rate) dated 28.6.2017 as amended “Governmental Authority” means an authority or a board or any other body, -

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 90 per cent or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of the Constitution or to a Panchayat under article 243G of the Constitution.

[KASTURI SETHI]

Dear Sir,

Pl. go through Notification No.3/18-CT(R) dated 25.1.18 amending original Notification No.13.17-CT(R) dated 28.6.17 (RCM). MIDC is neither Govt. nor local authority. Hence not covered under RCM. Corporation is neither Govt. nor local authority. MIDC is a corporate body. A corporation formed under an Act is not Govt.

Even if all shares of a company are owned by Govt., the company is not the department of Govt.-----Supreme Court

[Kaustubh Karandikar]

Thanks for the kind advice by Rajgopalan and Kasturi ji.

In my view, MIDC will have to charge GST as per Section 7, Schedule II, Sr.No. 2(a) i.e. any lease, tenancy, easement, licence to occupy land is a supply of services. Your kind views please

[KASTURI SETHI]

Dear Sir,

I agree with you. Also go through serial no.5 (a) of Schedule-II. Renting of Immovable property also includes lease. Just for knowledge sake. Serial no. 2(a) should be preferred.

[Shilpi Jain]

Upfront premium paid for long term lease of industrial plots provided by industrial development corporations is exempt. Pls look at s no. 43 igst exemption notification

[Shilpi Jain]

Monthly lease rental will not be exempt

[Ganeshan Kalyani]

I agree with the views of the experts. It was taxable in erstwhile tax regime as well.

[Prashant Bhide]

Sir /Madam

what is definition or covered the on going concern business sale or transfer to another person , in this case GST are liable? MIDC plot for 99 years are lease basis but the same business are sold and only lease right automatically transfer to purchaser for futher business so the said transcation is on going corcern? GST liability on agreement value? stamp duty is already paid.

AI Summary

GST on lease of land treated as supply; reverse charge applies only if lessor qualifies as Governmental Authority. Leases of land are treated as a supply of services and attract GST. Reverse charge applies only if the lessor qualifies as a Governmental Authority under the notification; corporate development corporations are typically not treated as government for that purpose. Upfront premiums for long term industrial leases may be IGST exempt, while monthly lease rentals remain taxable. Ongoing concern issues on transfer of business on leased plots were queried but not settled.