TaxTMI 
TaxTMI 
2021 (12) TMI 36
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....us GNAL was allotted the said plot on long-term lease for developing a greenfield project of caustic soda plant vide Deed of Rectification executed between GIDC and GNAL on 8-1-18, for which GACL invoiced GNAL for Rs. 85,89,97,520/- (72,79,64,000/- as consideration plus GST of Rs. 13,10,33,520/-) for the act of agreeing to surrender/ transfer its leasehold rights of the plot in favour of GNAL. 3. GNAL submits as follows: (i) One time consideration paid by GNAL to GACL cannot be taken as Sale Price of the Land on the ground that it is neither the Sale of Immovable Property nor is the Sub-Lease of Property. As the ownership of the land remains with GIDC permanently and hence it is just an act of relinquishment of rights in the Leasehold Land. Hence, the said transaction doesn't fall under the purview of Section 17(5)(d). (ii) The rights in the plot of land have been acquired by the GNAL for developing a Greenfield project for manufacturing caustic soda. Therefore, one can conclude that the consideration paid by the GNAL to GACL towards acquiring the rights over the plot of land is in the course of or for the furtherance of business. 4. GNAL has satisfied all t....
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.... the definition of 'Plant and machinery'. In other words, as Caustic Soda Plant & Power Plant qualify as a 'Plant and machinery', GST chargeable, if any, on transfer of leasehold rights is rightly admissible to them as the bar placed under Section 17(5)(d) of the CGST Act does not apply in a case where goods and/or services are procured for construction of a 'Plant and Machinery'. e) The criteria for eligibility and conditions to take input tax credit of Central Goods and Service Tax ('CGST') and State Goods and Services Tax ('SGST') have been prescribed under Section 16 of the Central Goods and Services Tax Act, 2017 ('CGST Act') and Section 16 of the Gujarat State Goods and Services Tax, Act 2017 ('SGST Act') respectively. Section 16(1) of the CGST Act and SGST Act allows a registered person to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. Therefore, in order to avail credit, the person should be a 'registered person' and the services supplied to him should be used in the course or furtherance of his business. f) The words "inp....
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....n tax" derives its name from the fact that tax burden is ultimately borne by the final consumer and business does not bear the burden of the tax, since the business companies are allowed to take credit of tax paid on inputs supplied/received by them. If therefore input credit is denied to the input service received by the assessee, they will become burden to the assessee, which is against the very grain or principle of GST being a consumption tax. Therefore, the Applicants are eligible to avail input credit of GST paid on lease charges of land. i) Section 16(2) of CGST Act and SGST Act lays down the pre-conditions to avail input tax credit. The conditions prescribed under Sec 16(2) of the Act are as follows: i) Possession of Tax Invoice : They are in possession of tax invoice issued by the lessor. ii) Receipt of Services: They entered into a long-term lease agreement with the lessor vide Lease Agreement dated 8th January 2018. Accordingly, the effective date of commencement of lease is 8th January, 2018. They have the legal right over the land and are in possession of land (for achieving their objective of furtherance of business by construction of plant ....
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....ct services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation.--For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under section 10; (f) goods or services or both received by a non-resident taxable person except on goods imported by him; (g) goods or services or both used for personal consumption; (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of sections 74, 129 and 130." k) GST paid by the applicant company on the lease c....
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....slature to exercise powers conferred by Section 7(2) of CGST Act and issue requisite Notification sans which, merely going by status of CIDCO, it cannot be held that lease premium would not attract / invite liability to pay GST; In view of the above judgement, it is clear that the activity of leasing of land is liable to GST as supply of service and accordingly, they are eligible to avail the GST levied by the lessor on supply of land on lease. m) Thus, in the absence of any restriction on availment of credit under the GST Act on tax paid on leasing of land service (as an objective of furtherance of business for the construction of plant and machineries for setting up Caustic Soda plant, as explained above) and fulfilment of all the conditions to avail credit, the Applicants are eligible to avail credit of CGST and SGST paid to lessor on acquiring land on lease for business activities. 6. GNAL vide its letter dated 30-9-21, submitted as follows: i. We have already obtained GST registration on 01.07.2017 and our Dahej Plant site address has been added as Additional Place of Business in our Registration Certificate. The copy of our Registration Certifica....
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....its rights in the leasehold property in favour of GNAL? Personal Hearing 8. GNAL vide its authorised representatives appeared for the hearing on 23-9-21 and reiterated the contents of the application. DISCUSSION & FINDINGS 9. We have carefully considered all the submissions made by GNAL. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 10. GNAL seeks Ruling whether said GST portion borne by it, is admissible as ITC. We are not getting into the merit of SAC in the subject invoice raised by GACL on GNAL, but do hold that GACL has transferred its lease hold right on land to GNAL, for GNAL to further its caustic soda project. GNAL in written submission dated 23-9-21, at page 11 held the activity between GACL and GNAL as leasing of land liable to GST. 11. We refer to Section 16(1) CGST Act, reproduced as follows: Section 16(1) 16. Eligibility and conditions for taking input tax credit.-....
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....nts covered under the definition of plant and machinery held that the word 'or' in clause (d) of Section 17(5) of the CGST Act can be read as 'and' since it appears to give effect to the intention of the Legislature to allow input tax credit on the construction of plant and/or machinery. Relevant portion of the aforementioned Ruling reads as follows: "15. It is the contention of the appellant that the definition of the expression 'plant and machinery' as used in Chapter V and Chapter VI of the CGST Act cannot be applied to interpret the words ''plant or machinery' used in clause(d) of Section 17(5) of the CGST Act. We find that in ordinary usage 'and' is conjunctive and 'or' disjunctive. From the well known dictum of the Supreme Court that grammar is a good guide to meaning but is a bad master to dictate, it will appear that there is no hard and fast rule as to the meaning of the word 'or' and this word gets its proper meaning from the particular context from which it has been used. Justice G.P.Singh in the principles of Statutory Interpretation(Thirteenth Edition) Chapter 7 page 485 has stated as follows: "The word 'or' is normally disjunctive and 'and' is normal....
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.... machinery'. 14. Further, besides the discussed legislative intent, the plain meaning of very wordings of Section 17(5)(d) itself blocks subject credit admissibility, detailed as follows: i. We find that the words used in the said Section 17(5)(d) reads as: services received by a taxable person for construction of immovable property (other than plant or machinery). Hypothetically, if the word 'used' was in the place of 'for', then said Section 17(5)(d) would be read as: Services received by a taxable person (used in) construction of immovable property (other than plant or machinery).... In such a hypothetical case and limiting to the wordings of Section 17(5)(d) only, there would have been a prima facie merit in the submission of the GNAL to consider that subject ITC is not blocked. But the word used in the said Parliamentary Act in said clause (d) is 'for' and not 'used'. The word 'for' indicates a purpose, an intended goal. Here, 'for' is to be construed to indicate the purpose to construct the buildings/ civil structures, administrative block et al on the leased land. The purpose to enter into the subject agreement with GACL for the subject land is to construct facto....
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....of their pipes fitted on supporting structures may be installed in the open, i.e, outside a shed but on a supporting structure. We are of the opinion that the proportion of plot area used for the construction of civil structures/ administrative block/ factory/ building sheds (having plant and machinery inside it )vis-à-vis the proportion of plot area used for installation of pipes fitted on supporting structures in the open on the land, if that be the case, cannot be taken as a basis for awarding a proportionate credit, for the CGST Act and Rules have not envisaged such a mechanism to award proportionate credit for GST in such cases. 16. We rest on the dictum, 'first things first', that is to say, the land will be used for construction of the immovable property such as civil structures/ administrative block/ sheds/ factory building. Further, We note that the explanation to said section 17(5) defines 'plant & machinery' as, Explanation.-For the purposes of this Chapter and Chapter VI, the expression 'plant and machinery' means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or ....
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....mption base. * GST on long term lease of land presently attracts GST of 18% along with stamp duty of 6-7% levied by states. This high rate of tax makes new projects unviable particularly when tax credit of GST on such leasing is not available for construction of immovable property. * Taxation on leasing of land is the only are in GST where there is an overlap between GST and powers of States to levy a parallel tax. Similar concession has already been given to GIFT city." 18. We note that the GST Council is cognizant of this position of law that tax credit of GST on leasing of land, for construction of immovable property, is not available. Here we find it apt to reproduce the wordings of H'ble Delhi High Court, in the case of Manufacturers Traders Association vs UOI-2020 (43) G.S.T.L. 616 (Del.), at para 10: 'GST Council - Status of - This is a Constitutional body brought into existence by 101st Amendment and is chaired by the Union Minister for Finance with Finance Minister of all States as members - Rates of GST are jointly decided and recommendations made to Central and State Governments - It is highest deliberative forum to resolve issues arising ou....