TaxTMI 
TaxTMI 
2023 (11) TMI 869
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....al Corporation [for short - 'SMC'|. The said lease expired in the year 2018. SMC has now come up with a lease proposal to renew it for a further period of 99 years. The consideration to be paid for renewal of the lease is as under viz. a) Lease renewal [24,43 5 sq mtr x Re 1 x 99 years) 24,19,065/- b) Premium on lease renewal 1,27,67,28,750/- [24,435 sq mtr x Rs. 52,250] The aforementioned amount is to be paid in 5 instalments, annually. 4. The applicant, being a non-profit association, with the primary activity as listed supra, lacks such huge funds & therefore the payment which has to be made will have to be recovered from the owners of the shops in the Surat Textile Market, who are also shareholders of the applicant. 5. In view of the foregoing, the applicant has sought advance ruling on the below mentioned questions viz,- (i) Do we have to pay tax under Reverse Charge Mechanism u/s 9(3) or 9(4) for lease renewal amount payable to SMC ? (ii) Do we have to pay tax under Reverse Charge Mechanism u/s 9(3) or 9(4) for premium on lease renewal amount payable to SMC ? (iii) Will collection made from shareholders/shop owner....
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....persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of business; ^2[and] (c) the activities specified in Schedule I. made or agreed to be made without a consideration: ^3[****] (d) ^4[****] * Enforced w.e.f 1st July 2017. 1. Inserted w.e.f. 01st July, 2017 by s. 108 of The Finance Act. 2021 (No. 13 of 2021) - Brought into force on 01st January, 2022 vide Notification No, 39/2021-C. T., dated 21st December. 2021. 10. Multiple issues have been raised by the applicant. The first issue on which ruling is sought is whether the applicant is liable to pay tax under Reverse Charge Mechanism [RCM] u/s 9(3) or 9(4) on lease renewal, payable to SMC. Section 9(3) of the CGST Act, 2017 empowers the Government to issue notification, on the recommendations of the GST Council, specifying categories of supply of goods or services or both wherein tax shall be paid on RCM basis by the recipient,. Section 9(4), ibid, on the other hand, empowers Government to issue a notification to specify a class....
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....ated the 28th June, 2017, namely :- In the said notification, in the Table. - (2) against serial number 5, in column (2), in the sub-clause (2), in item (i). the words "by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority" shall be omitted; 11. Further, serial No. 2, to Schedule II to the CGST Act, 2017, states as follows viz SCHEDULE II. [See section 7] ACTIVITIES 1[OR TRANSACTIONS] TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services: (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 12. Hence, lease of land is to be treated as a supply of services chargeable to GST. In terms of Sr. No. 5 of notification No. 13/2017-CT(Rate) dated 28.6.2017, as amended, the applicant, [who as a recipient falls within the ambit of a 'business entity', in terms of the definition o....
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....tions have been received by the Board seeking clarification regarding admissibility of GST exemption on the upfront amount which is determined upfront but is paid or payable in instalments for long term (thirty years, or more) lease of industrial plots or plots for development of financial infrastructure under Notification 12/2017-Central Tax (R)S. No. 41. dated 28-6-2017. 2. The mailer has been examined. The entry at S. No. 41 of Notification 12/2017-Central Tax (R), dated 28-6-2017 reads as under: SI. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition (1) (2) (3) (4) (5) 41 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) 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 50 per cent, or more ownership of Central Government. State Government. Union territory to the ind....
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.... (b) The lease shall be for a period of 30 years or more; in the present matter the lease is made for 99 years. (c) The long term lease shall be in respect of industrial plots or plots for development of infrastructure for financial business, located in any industrial or financial business area. 16. In this case the service provider is not State Government Industrial Development Corporation or Undertakings or any other entity having 50% or more ownership of Central Government, State Government, Union Territory' but a local authority i.e. Surat Municipal Corporation. Further, the said Notification or GST Act, 2017, does not define the 'industrial or financial business area'. Therefore, we refer to the definition of 'industrial or financial business area' from Gujarat Industrial Development Act, 1962. As per section 2(g) of the Gujarat Industrial Development Act, 1962, 'Industrial Area' means - "any area declared to be an industrial area by the State Government by Notification in the Official Gazette, which is to be developed and where industries are to be accommodated". Thus, for considering any area as industrial or financial business area, it is necessary that....
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....n lease renewal and annual lease premium paid by the applicant to the AUDA for leasing of Surat Textile Market is covered under supply of service in terms of Section 7(1) of CGST Act, 2017. Accordingly, the said One-time premium/salami/ premium on lease renewal and annual lease premium paid by the applicant to Surat Municipal Corporation are taxable under GST in terms of the Notification No. 11/2017-CT (Rate) dated 28.06.2017. 20. Moving on to the question as to whether the applicant is liable to pay GST under RCM under Section 9(3) of CGST Act, 2017, we find that in Further, in terms of Sr. No. 5 of notification No. 13/2017-CT(Rate) dated 28.6.2017, as amended, the applicant, [who as a recipient falls within the ambit of a 'business entity', in terms of the definition of business as per 2(17), ibid], becomes liable to discharge GST under RCM in terms of section 9(3) of the CGST Act, 2017 in respect of the services supplied by SMC, [a local authority in terms of Section 2(69), ibid]. This view stands substantiated in terms of the Advance Ruling no. GUJ/GAAR/R/64/2020 dated 17.9.2020 in the case of M/s Jinmagal Corporation. 21. The next question posed before us is whether coll....