TaxTMI 
TaxTMI 
2020 (11) TMI 1060
X X X X Extracts X X X X
X X X X Extracts X X X X
....e CGST Act') read with Section 100 of the Rajasthan GST Act, 2017 (hereinafter also referred to as 'the RGST Act') by M/s Hazari Bagh Builders Private Limited, 104 LIC Colony, 1st Floor, Vaishali Nagar, Ajmer-305001 (hereinafter also referred to as 'the Appellant') against the Advance Ruling No. RAJ/AAR/2020-21/05 dated 30.06.2020 on 21.08.2020. BRIEF FACTS OF THE CASE 3.1. M/s Hazari Bagh Builders Pvt. Ltd., 104, LIC Colony, Vaishali Nagar, Ajmer-305001 is holder of GST Registration No. 08AAECH7175C1ZL. 3.2. Rail Land Development Authority (hereinafter referred to as "RLDA"), a statutory authority under Ministry of Railway, Government of India having its office near Safdarjung Railway Station, Moti Bagh-I, New Delhi issued a Request for proposal (RFP) (enclosed at Page 134 in the Lease Agreement Executed between RLDA and M/s Hazari Bagh Builders Pvt. Ltd) which was publicized by RLDA for grant of lease of Railways land at Hazari Bagh, Ajmer for 99 years on 15.02.2018 for Residential Purpose. M/s. H.S. Mehta Infra Pvt. Ltd. Ajmer submitted the bids for Plot A at Rs. 159818170.00 lease premium and for. Plot B as Rs.319074800.00 lease premium. It was ment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017? ii. Whether the amount of Rs. 158657105.00 which is transferred by the Appellant Company as Security Deposit in pursuance to the tender and lease agreement dated 08.11.2019 is exempt under GST in view of the Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017? iii. Whether the amount of Rs.158657105.00 deposited during February, 2019 is exempt under Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017? 3.4 The Rajasthan Authority for Advance Ruling, (hereinafter also referred as 'the AAR' vide Advance Ruling No. RAJ/AAR/2020-21/05 dated 30.06.2020 passed the following order: i. The Lease Agreement between the Applicant Company i.e. the Lessee and RLDA for a period of 99 years is not exempted from levy of GST in view of the Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017. ii. The amount of Rs.158657105/- which is tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lled. Clause 26.3 clearly states that any amount paid before the execution of the Lease agreement, is refundable in case of breach except the bid security submitted by the Applicant without prejudice to any other rights or remedies. This implies that amount which is paid in the month of February, 2019 before the execution of lease agreement i.e. 08.11.2019 is totally refundable and do not form part of the consideration and is only a deposit made for confirmation of contract and is in nature of Security. Therefore, it is not eligible to GST. (vii) The Appellant Company has entered into a long term Lease Agreement of 99 years with RLDA for undertaking residential & commercial development along with development of financial infrastructure as on 08.11.2019. The Appellant Company paid a sum of Rs.158657105.00 in parts by way of RTGS on separate days in the month of February, 2019 as Security deposit which, in case of breach is refundable after forfeiting the bid security deposited separately for both the Plots as per the terms of the lease agreement which is Rs.3300000.00 for Plot A and of Rs.5200000.00 for Plot B. The issue to be examined before the learned Authority for Advan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt is refundable after forfeiting the security bid submitted by bidder during the bid in case of any default from (a) to (e) as mentioned on page 399 before execution of lease agreement. As agreement was executed on 08.11.2019 and paid amount before this date is totally refundable in case default by bidder after only forfeiting the bids security it should be exempted from GST. (xii) The said amount is not a premium and only a security by way of which the contract is confirmed it cannot attract the liability of GST. The payment of premium would commence only after the said agreement has been entered into and not prior to that. Any amount paid before entering into the contract and where no services are provided it cannot be considered as premium. Such amount is only for confirmation by the parties to enter-into the Long term lease Agreement. The said amount does not fall under the scope of consideration as there was neither any contract between the parties nor any services provided. Hence, such amount is beyond the scope of GST. (xiii) If the said amount is considered as "lease premium: it is to be pointed out here that the Government, Ministry of Finance by way of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or more) under Notification No. 12/2017- Central Tax Rate, Serial No. 41 dated 28.06.2017. Upfront amount called as premium payable in respect of service by way of grant of long term lease (of 30 years or more) of plots for development of infrastructure for financial business provided by undertakings having 50% or more ownership of Central Government to the developers in financial business area. As such through this circular no GST is applicable on the RLDA land. (xviii) Authority for advance ruling has wrongly interpreted the Notification and the facts of the present case as all the condition of the said Notifications are fulfilled where along with residential plots, industrial plots and financial business area are also included and-therefore all the conditions of the Entry in the Circular are fulfilled and the Appellant squarely falls under the said Circular exempting the amount paid even otherwise. (xix) Learned AAR has wrongly on Page 17 of the order in para 10 observed that it is a rental or leasing service and accordingly taxable as such and mentioned the HSN Code which is contrary to the facts of the case and the application given for AAR. The question was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs it under entry no 41. The wrong interpretation has been taken by AAR of Residential contrary to the Railways ACT and the provisions contained in the lease agreement. Further it is in Financial business Area and hence also covered under it. (xxv) In the agreement at page 377 in para 1(i) it has been mentioned that it will be for commercial development of vacant railway land. In the next para it is mentioned that it is for developing any railway land for commercial use. (xxvi) It can therefore be seen on perusal of the Entries in the Notification and the nature of activity undertaken by the Applicant Company that the present transaction of long term lease is squarely covered under Entry No.- 41 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 and is exempt from GST from the very inception of CGST Act, 2017. (xxvii) The questions posed by the appellant in their Application for advance ruling were only confined to interpretation of Notification and its applicability on the amount received by RLDA. The learned authority for advance ruling erred by going beyond scope of the questions asked and held that only because the amount is paid prior to 01.04.20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under GST at the rate of 18%. The Order is illegal and bad in law. d. That the learned AAR has wrongly on Page 17 of the order on para 10 observed that it is a rental or leasing service and accordingly taxable as such and mentioned the HSN Code which is contrary to the facts of the case and the application given for AAR. The question was the Upfront amount being charged by the RLDA was taxable before 01.04.2019 which was deposited by the assessee as it was in the nature of refundable security as if the lease agreement condition were not fulfilled then in such case the complete amount was refundable. The agreement was entered after 01.04.2019 and hence it was covered by the later notification no. 04/2019 - CT (Rate) Dt. 29.03.2019 under entry no. 41 B which exempted or mentioned NIL rate for the upfront amount by any name. The relevant notification has not been considered while coming to conclusion. e. That further in para 11 of the order the Learned AAR has referred to the renting of immoveable property which was not the issue under consideration and the learned AAR has without any basis and contrary to the lease agreement Dt. 08.11.2019 has observed or held that renting of i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Railway Land. Further reference may be made to page 379 of clause j, k, n and o about the description the definition. Thereafter reference may be made to page 399 at clause 26 and then clause 26.3 regarding the refund and the conditions to the fulfilled for the execution of lease agreement. It states that in case of cancellation of lease agreement the amount would be refunded. Thereafter reference may be made to page 415 and clause 2.3, 2.3.1, 2.3.3 and 2.3.4 about the grant of lease rights. Further reference to be made to page 416 and clause Article 3 and particularly Article 3.1 to 3.3. l. That on perusal of the Long term lease agreement dated 08.11.2019 (enclosed herewith and marked as Annexure-1) Clause 26 enlists certain conditions on breach of which the contract would stand terminated and the bid security paid by the Company would stand forfeited. However, it is to be noted that the amount otherwise paid to RLDA is fully refundable and the said arrangement is without prejudice to any other rights or remedies. It is quite clear that the amount which is paid without even executing the agreement could not possibly be construed to be a premium paid for such lease agreement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pt from any GST liability for the amount paid in lieu of the agreement executed on 08.11.2019. q. That it is submitted here that the lease agreement has been entered into on 08.11.2019 and the said Notification covers any amount which becomes payable on or after 01.04.2019. In the present case as the agreement has been executed on 08.11.2019, the lease premium in pursuance to such an agreement is squarely covered under the said Notification and is totally exempt from the levy of GST. It is again submitted here that neither the agreement was executed nor any services of lease were extended by RLDA in the form of possession to the applicant therefore the amount if paid as premium was in pursuance to an agreement executed after the exemption Notification came into effect. r. That it is a well accepted fact that the Lease Agreement was entered into on 08.11.2019. Any amount paid before that was totally refundable and was only paid to secure the bid and was not a premium. Even if the amount is to be considered as premium it is not taxable by virtue of the abovementioned Notification as the transaction amount became a lease premium only after the execution of the contract and not p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to conclusion. v. That the entry no 41 of the notification No. 12/2017 CT (Rate) Dt. 24.6.2017 squarely covers the issue and the transaction is exempt under it as the ownership is 100% of Central Government whereas the Notification mentions only 50% ownership Requirement. Further the said notification mentions that it should be in Financial Business Area and that condition is also satisfied. Reference may be made to the Railways Act 1989 and particularly Chapter IIA which deals with the RLDA who has leased the land to assessee. As per the provisions contained in Chapter IIA clause 4D defining Functions of Authority the sub clause 4D (2) (ii) is important and it says "to develop railway land for commercial use as may be entrusted by the Central Government for the purpose of Generating revenues by non tariff measures". w. That the transaction for the railway is Commercial or financial business and hence covers it under entry no 41, The wrong interpretation has been taken by AAR of Residential contrary to the Railways Act and the provisions contained in the lease agreement. Further it is in financial business Area and hence also covered under it. x. That in the agreement a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....17-Central Tax (rate) dated 28.06.2017. ii. The amount of Rs. 158657105/- which is transferred by the Applicant/SPV in pursuance to the tender and lease agreement dated 08.11.2019 is not exempted under GST in view of the Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017. iii. The amount of Rs.158657105/- deposited during February, 2019 is not exempted from GST vide Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017. 6.3 The Appellant being not satisfied with the above Ruling has therefore, filed the present appeal before this forum. 6.4 The Appellant has contended that amount of Rs.158657105/-paid in the month of February, 2019 before the execution of lease agreement i.e. 08.11.2019 is security deposit and not an installment of lease premium. On perusal of Lease Agreement dated 08.11.2019 executed between RLDA and the appellant, we find that as per Letter of acceptance dated 26.09.2018 and bid form (Page 16-17 and 21-26 of Lease Agreement), M/s H. S. Mehta Infra Pvt. Ltd.- Lead Member of Consortium, the selected....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scussion, we find that the fact of the case is quite different from the instant appeal. 6.5 The appellant in his appeal memo has contended that as per the terms of the Lease Agreement by way of clause 26, certain conditions have been enlisted where the execution of lease agreement can be terminated if the same are not fulfilled. Clause 26.3 clearly states that any amount paid before the execution of the Lease agreement, is refundable in case of breach except the bid security submitted by the Applicant without prejudice to any other rights or remedies. This implies that amount which is paid in the month of February, 2019 before the execution of lease agreement i.e. 08.11.2019 is totally refundable and do not form part of the consideration and is only a deposit made for confirmation of contract and is in nature of Security. We observe that the appellant has totally misconstrued the clause 26.3 which provides for forfeiture of bid security deposit in case of breach of the Bid by the Bidder. We are not in agreement with contention of the appellant that if any instalment of lease premium amount is refunded in case of breach of Bid, its nomenclature will be changed from Premium to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... - of Industrial plots or plots for development of infrastructure for financial business; - entity having 50 per cent, or more ownership of Central Government, State Government, Union territory; - to developers in any industrial or financial business area On perusal of document attached with Lease Agreement, we observe that, conditions regarding long term lease and entity having 50% or more of ownership of Central Government may be satisfied as lease is for 99 years and RLDA is the statutory body of Government of India and having 100% ownership of Central government. However, rest two conditions namely, industrial plots or plots for development of infrastructure for financial business and that to award such lease to developers in any industrial or financial business area needs to be examined. We find that the RLDA has not awarded industrial plots to the appellant but awarded a portion of land over which some residential infrastructures are meant to be built. An industrial plot is the one in which developer is granted permission by competent authority, be it Central Government or State Government in reference to some scheme of development. These plot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate) dated 28.06.2017. 6.7 The appellant has also contended that the amount paid is not taxable in light of the Notification No. 04/2019 dated 29.03.2019. We find that Entry No. 41B of exemption Notification No. 12/2017-Central Tax (rate) dated 28.06.2017 has been inserted vide Notification No. 04/2019 dated 29.03.2019 and effective w.e.f. 01.04.2019 which is reproduced as under: 41B Heading 9972 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, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. The amount of GST exemption available for construction of residential apartments in the project under this notification shall be calculated as under: [GST payable on upfront amount (called as premium, salami, cost, price, development charges or by any othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Reverse Charge Mechanism on the premium paid/payable to RLDA. The Appellant has also not disputed this fact anywhere in appeal memo that they are not liable to pay GST under RCM. As the said Notification has been made effective from 01.04.2019, therefore, to decide the applicability of exemption in this case 'Time of Supply of Services' is required to be determined. The 'Time of Supply of Services' for cases of Reverse Charge Mechanism, is defined in Section 13 (3) of the CGST Act, 2017 as under- (3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:- (a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or (b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier: Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the dat....