TaxTMI 
TaxTMI 
2026 (5) TMI 487
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....against the Advance Ruling Order No. 07/AP/GST/2025 dt:06.08.2025passed by the Authority for Advance Ruling (AAR), Andhra Pradesh. 3. Brief Facts of the Case: 3.1 The appellant, M/s. Kobelco Construction Equipment India Pvt Ltd GSTN: 37AACCK9469N1ZN) engaged is a manufacturer of excavators that established its manufacturing unit in Sri City, Satyavedu and Varadaiahpalem Mandals, Chittoor District, Andhra Pradesh. 3.2 M/s Sri City Private Limited, acquired land for developing a mixed-use and integrated industrial park comprising commercial, residential, and recreational facilities, as well as Special Economic Zone ("SEZ"), Domestic Tariff Zone ("DTZ"), and Free Trade Warehousing Zone ("FTWZ") components (collectively referred to as "Sri City"). 3.3 Out of the land acquired, a portion of the land ("Demised Premises") forming part of the DTZ, admeasuring 9.35 acres, was leased to Kobelco Cranes India Private Limited ("Initial Lessee") under a Lease Deed dated 29 May 2015, registered as Document No. 520/2015, Book 1 in the office of the Sub-Registrar, Satyavedu. 3.4 The Initial Lessee, having been in lawful possession of the Demised Premises pursuant to the Lease Deed, h....
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....rights along with the Superstructure and shall serve as the basis for negotiating and executing a definitive "Agreement for the Transfer of Leasehold Rights," upon completion of all necessary formalities. 3.10 The Lessor originally granted a lease of the Demised Premises to the Transferor for a period of ninety-nine (99) years, commencing from 29 May 2015 ("Original Lease Term"), under the Lease Deed executed between the Lessor and the Transferor. By virtue of the transfer, the Transferee shall be entitled to the remaining unexpired term of the lease, being a period of eighty-nine (89) years, subject to the same terms, conditions, covenants, and obligations as set forth in the Lease Deed and the Agreement for the Transfer of Leasehold Rights, unless otherwise modified therein. 3.11 In consideration of the transfer of leasehold rights in the Demised Premises, together with the Superstructure and all improvements and appurtenances thereon, the Transferee agreed to pay a sum of Rs. 11,35,00,000 (Rupees Eleven Crores and Thirty-five Lakhs only) ("Property Transfer Value") and Rs. 4,03,00,000 (Rupees Four Crores and Three Lakhs only) (Recovery of Cost of Land Development) to the T....
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....evy of Goods and Service tax under definition of Section 7 of Goods and Service tax Act, 2017. If so whether Goods and Service Tax is applicable on Recovery of cost of land Development paid India Metal One Steel Plate Processing Private Limited (Transferee) to Kobelco Construction Equipment India Pvt Ltd (Transferor)? Ruling: Yes. 3. Whether Kobelco Construction Equipment India Pvt Ltd is entitled to Input Tax Credit of Goods and Service tax paid on the commission to be paid in relation of the transfer of leasehold land to Sri City Development Authority, under the provision of Goods and Service Tax Act 2017? Ruling: Yes. 5. Filing of appeal against the AAR: 5.1 Aggrieved by the ruling of the AAR, the appellant filed Form GST ARA-02 on 06.09.2025, contesting the ruling and seeking relief from the Appellate Authority for Advance Ruling (AAAR) on the following grounds. Grounds of appeal: 1. Whether the Advance Ruling Authority was right in rejecting the contention of the question of law raised before it on the ground that the assignment of leasehold rights of leasehold land would be covered by the scope of supply for levy of goods ....
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....ersonal hearing on 26.11.2025. Sri M.V.J.K. Kumar, authorized representative and Advocate, appeared on behalf of the applicant and reiterated the submissions made in the grounds of appeal and also submitted written submissions during the hearing. 7. Discussion and Findings: 7.1 We have carefully considered the grounds of appeal raised by the appellant, examined the Advance Ruling issued by the AAR, scrutinized the documents placed on record, and heard the submissions made by the authorized representative during the personal hearing held on 26.11.2025.The main issues in appeal relate to the taxability of the assignment of leasehold rights and the GST treatment of recovery of land development costs, and the eligibility of ITC in relation to commission paid. The issues raised in the grounds of appeal are examined hereunder. 7.2 Whether the Advance Ruling Authority was right in rejecting the contention of the question of law raised before it on the ground that the assignment of leasehold rights of leasehold land would be covered by the scope of supply for levy of goods or service tax under section 7 of the CGST Act 2017? If so, whether goods and service tax is applicable on th....
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.... or the underlying intent of the GST regime. In view of the fact that the Departmental appeal against the said decision of Hon'ble Hight Court of Gujarat has been admitted by the Hon'ble Supreme Court, the said decision relied by the appellant has not attained any finality and therefore, the AAR was justified in applying the statutory provisions. The AAR has correctly concluded, the intention of the GST law is to tax all transactions involving transfer of rights in immovable property that do not transfer title. The assignment of leasehold rights, even when long-term or for substantial consideration, does not change the nature of the transaction from a service to a sale of land. Further, the appellant reliance on supreme court judgement in Safari Retreats misplaced. Because, Safari Retreats deals with input tax credit on construction of immovable building for leasing. It does not address the taxability of GST on assignment/transfer of leasehold land rights (without construction). Therefore, the decision in the said case is not applicable to the facts of the present appeal. In light of the clear statutory mandate, persuasive advance rulings from other States, and CBIC Cir....
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....ce Ruling in the case of M/s Enfield Apparels Private Limited vide 11/WBAAR/2020-21, dated 17.8.2020, iv) CBIC Circular No. 44/18/2018-CGST, dated 2.5.2018. According to the appellant, the authorities passing the AAR should not have been influenced by the decisions of the AARs in other States and CBIC circulars. The AAR did not treat these rulings as binding precedents but only as persuasive interpretative tools, which is both appropriate and permissible. When similar factual situations have been consistently interpreted across different jurisdictions-such as in the rulings of the Maharashtra AAR (General Motors India Pvt. Ltd.), the Uttar Pradesh AAR (Remarkable Industries Pvt. Ltd.), and the West Bengal AAR (Enfield Apparels Pvt. Ltd.)-it lends uniformity and clarity to the application of the law. Further, CBIC circulars issued under Section 168 of the CGST Act are authorized to ensure uniform administration of the GST law across the country. Circular No. 44/18/2018-CGST expressly clarifies the treatment of long-term lease transactions and supports the AAR's interpretation. The AAR's reference to these authorities is therefore reasonable, and does not amount to any....