GST APPLICABLE ON SALES OF FACTORY SHED

[SHAILESH VYAS]

Dear sir,

My one of client have Factory shed situated at GIDC Area. The said shed alloted by GIDC in the year of 2007 for 99 years lease.My Client sold this factory shed and applicable transfer fees paid to GIDC Authority by purchaser on this transfer.Now, GST Authority ask to pay GST on this sale. so, my query as below :

1. As per allotment some area of land are without construction of shed on which GST applicable

[KASTURI SETHI]

Under construction or semi-constructed shed is taxable under GST.

[KASTURI SETHI]

as it is sold/supplied.

[KASTURI SETHI]

SH.SHAILESH VYAS JI,

Pl. go through the following decision of AAR -GST-(UK)

Sale of under construction building is supply of service but exemption is admissible as going concern as a whole.--------AAR GST Uttarakhand reported as 2020 (4) TMI 67 - AUTHORITY FOR ADVANCE RULING, UTTARAKHAND - Rajiv Bansal and Sudarshan Mittal

[Shilpi Jain]

Is this a sale or assignment of lease rights?

[Padmanathan KV]

when factory shed is alloted by GIDC under 99 year lease, can it be sold? I believe you can only sub-lease it or assign lease right etc.

The common law principle is you cannot transfer better title than you actually have or nemo dat quod non habet.

Therefore, pls clarify the facts in the query.

[SHAILESH VYAS]

Dear Shilpi medam,

GIDC Alloted us on lease for 99 years and we sale the said premises and prepare an assignment of lease right and registered with Sub registrar. so, then we liable to collect and pay GST.

[Padmanathan KV]

based on your above clarification, it seems the transaction is covered under SAC 997212 taxable at 18%. This is only my prima facie observation and the registered document has to be verified before my observation is confirmed.

[Padmanathan KV]

also note that sale of building is not subject to GST as it is covered Under Schedule III. Only assignment of lease will be subject to GST.

[Shilpi Jain]

Also the question whether 99 year lease can be regarded as sale of land or only a lease transaction is pending before the Courts. So if you consider paying tax, pay it under protest sothat you can claim refund in case of any favourable decision.

[Shilpi Jain]

However, in case you pass the burden of this tax to your customers, then no refund would be eligible

AI Summary

Assignment of lease taxable; GST may apply to transfers of long-term lease rights, pay under protest to preserve refund claims. Assignment of 99 year lease rights in a factory shed is treated as a taxable supply and may attract GST, whereas sale of a completed building can be excluded under Schedule III. Under construction or semi constructed sheds are taxable as services. Whether a very long term lease amounts to a sale remains judicially unsettled; payment of tax under protest is advised to preserve refund claims, noting that shifting the tax burden to the purchaser can prevent refund recovery.