AI Drafter 
TaxTMI 
TaxTMI 
2019 (5) TMI 964
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....Holdings Pvt. Ltd. is in the hospitality and real estate business. The Appellant has embarked on a project of starting a Hotel and Banquet in the name of Buneau Vista in Eco Park, New Town, Kolkata. For the purpose of this project the Appellant has taken land measuring 20,039.75 sq. m. on lease from West Bengal Housing Infrastructure Development Corporation Limited (hereinafter referred to as "WBHIDCL") for 32 years on a lease premium of Rs. 17,20,00,000/= with an annual lease rent @10% of the lease premium for the first two years, which will be escalated @5% per annum in the subsequent years from the start of the third year over the last annual lease rent per annum. The project is proposed to be completed within a period of 2 years and the lease rent paid during the aforesaid pre-operative period shall be capitalized in the books of accounts by the Appellant. The WBHIDCL will be charging GST @ 18% on the lease rent. 3. The Appellant sought an advance ruling under section 97 of the West Bengal Goods and Services Tax Act, 2017/ the Central Goods and Services Tax Act, 2017, (hereinafter collectively referred to as "the GST Act") on the following question: Whether credit is avai....
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....land and can never be said that the same has been used for construction of immovable property. The WBAAR erroneously held that the prohibition under section 17(5)(d) of the GST Act, is not limited to the civil structure being constructed. It extends to the immovable property in general, and such supplies are essential for construction of the civil structure on the piece of land. (iii) The WBAAR erroneously held that the construction of an immovable property is critically dependent on the supply of the leasing service and so there is an inseparable and direct nexus between lease rent of land and construction of the building. The lease rent if capitalized, will be capitalized under "Leasehold Land" and not under the "Building Block". Thus lease rent is not used for construction of the building. Further, the same cannot be used for construction of land since no development of land is taking place. There is no nexus between lease rent of land and construction of the building. (iv) The WBAAR erred on the fact that the lease rental is a service and not a capital goods as defined under the GST Act. The Appellant will neither capitalize nor amortize the GST input in its b....
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....mpleted, then the lease rent for the pre-operative period of 2 years would be transferred to the block of Leasehold Land. Lease rent for F.Y. 2016-17 and F.Y. 2017-18 have been treated as Revenue Expenditure. 7. The Appellant emphasized on the scope and meaning of the word "for" in the provisions of clause (d) of sub-section (5) of section 17 of the GST Act. The Appellant submitted that "goods or services or both received by a taxable person for construction of an immovable property" means those goods or services which are directly used for construction of the hotel building. Lease rent was paid by the Appellant irrespective of construction taking place or not. The Appellant argues that as per agreement with the WBHIDCL, the former is providing two types of service to the latter, that is Designing and Building together being construction service in one part and Operating service in the other part. As per the provisions of clause (d) of sub-section (5) of section 17 of the GST Act input of supply for construction on own account only has been blocked. As the Appellant is providing construction service to the WBHIDCL and not on own account, hence the input on supply of construction....
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....art of town planning with an objective to conserve environment and eco-system and is not a unique feature of this particular Lease agreement between the Appellant and the WBHIDCL. 12. The project in discussion is building and operating a Hotel and Banquet with all added features in totality on the entire area of land measuring 20,039.75 sq. m. on lease. The Appellant's submission that it is providing two types of services to the WBHIDCL namely construction service and operating service is incorrect. As per the Lease Agreement the scope of the project is to Design, Built and Operate the Eco Resort. Now construction service is classified under SAC 9954 and the recipient of the service at the end of the construction also comes in possession of an asset in the manner of an immovable property. Para A clause (x) of the Lease Agreement stipulates that the Appellant "shall restore the land to its original condition before expiry of lease period" and again Para A clause (xx) stipulates that at the end of lease period the Appellant "shall make over peaceful vacant Khas possession of the demised land in as good a condition as the same is now" to the WBHIDCL. So it is clear that the WBH....