TaxTMI 
TaxTMI 
22 Sep 2026 
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Entry 41 of Notification No. 12/2017-Central Tax (Rate) states that:
Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20 per cent. or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area:
Provided that the leased plots shall be used for the purpose for industrial or financial activity.
A wholly state-government-owned company grants 50-year leases of land at an IT park to IT/ITES developers and units, for an upfront premium. The park's land was declared an "Industrial Area" by the state government under a state Industrial Areas Development-type statute, and a Single Window Clearance Board was constituted for it. The lease deeds restrict use strictly to IT/ITES purposes (with limited scope for ancillary "commercial facilities" complementing that use)
At the 38th GST Council's GoM on Real Estate (Nov 2019), when specifically asked whether "industrial activity" for this entry covers hospital/hotel construction or only factories, JS TRU-II is recorded as stating that land use/industrial activity is a State subject, each State has its own statutory framework, and "so long a state declares such areas as industrial park, these area are presently covered under the exemption."
- No CGST provision defines Industry or Industrial Activity
- The state's own Industrial statute and other Industrial Acts are arguably wide enough which raises its own over-inclusiveness problem (would a hotel or a pub inside the same declared area equally qualify?).
Will IT/ITeS be considered Industry or Industrial Activity for Entry 41?
Sir,
If the broad judicial definition of industry is adopted, then every commercial establishment or unit in a notified industrial area would qualify for the exemption, whereas the proviso specifically mentions the land shall be used for industrial or financial activity. Can we adopt the principle that every unit or establishment in an industrial notified area qualifies as an industrial unit?
No. Entry 41 sets a strict two-pronged, cumulative test: the plot must be situated in an industrial area and actually used for an "industrial or financial activity" under its proviso. Mere location within a notified zone is not enough.
Strict Construction of Tax Exemptions: Per the Supreme Court (Dilip Kumar & Co.), exemption notifications must be strictly construed. The broad Bangalore Water Supply labor law definition cannot be imported to treat every commercial business as an "industry."
Commercial vs. Industrial: In Anmol Industries, the West Bengal AAAR explicitly denied Entry 41 to long-term leases for commercial office/retail spaces, even though allotted by an industrial development corporation, because generic commercial activity fails the proviso.
Why IT/ITeS Qualifies (and Pubs/Hotels Do Not): IT/ITeS qualifies because Central and State industrial frameworks classify software development and tech processing as a core "industry" alongside manufacturing. Conversely, standalone pubs, hotels, or retail centers remain purely commercial services; only minor, integrated canteen/ATM amenities incidental to a primary industrial unit survive scrutiny.