TMI Blog2021 (1) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... the lessee cannot mortgage or transfer or sublet the premises or apportion there or without the permission of AUDA; that in case there is violation of any condition by lessee the lease deed will automatically be treated as cancelled. Whereas, when person purchase the commercial plot/land purchaser becomes the absolute owner of the plot and there is sale deed between seller and purchaser. On purchase of land, there is no requirement of renewal or extension of the sale period. The owner of the commercial plot/land is not required to pay any type of salami or annual lease premium for the plot/land. Also purchaser/owner of the land can sell the land to any body and no permission is required from seller as such purchaser have an absolute right of possession on land - the lease of plot for the 99 years by the applicant is not sale of land but is a lease of plot/land and therefore, does not get covered under clause 5 of Schedule III of CGST Act, 2017. Hence, it is concluded that this activity i.e. lease of plot and payment of one time lease premium / salami and annual premium paid by the applicant for lease of commercial plot/land is a supply and covered under Section 7(1) of CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The applicant submitted that they are of the view that a long term lease for a period exceeding 30 years tantamount to sale of the immovable property since the lessor is deprived of the right to use , enjoy and possess the property once the said lease has been granted. 4. The applicant submitted that the attention is drawn to the Entry No. 49 of the List II of Seventh Schedule of the Constitution of India, which empowers only the State government to levy any tax on land which is produced hereunder : 49 Taxes on Land and Building Attention is also drawn to Article 30 of Gujarat Stamp Duty Act wherein the aforesaid transaction is treated as conveyance. Such an instrument style as conveyance and conveying a right, title and interest in the immovable property is brought into existence. 5. The applicant submitted that the Stamp duty is levied on the value including upfront premium and five times the average annual rent reserved. The applicant submitted that this would constitute the market value of the said land. Hence the whole transaction is akin to sale. 6. Attention is invited to Schedule II of the GST Act wherein any lease, tenancy, easement, licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Supreme Court in the case of Kaliaperumal vs Rajagopal and anr (AIR 2009 SC 2122) has observed that Sale is defined as a transfer of ownership for a price. In a sale there is an absolute transfer of all rights in the properties sold. No rights are left with the transferor. Hon ble Bombay High Court in the case of Provident investment Co. Ltd vs Commissioner of income tax AIR 1954 Bom 95 observed that a sale or transfer presupposes the existence of the property which is sold or transferred. It presupposes the transfer from one person to another of the right in the property. 12. The applicant has submitted that Entry 49 of the List II of Seventh Schedule of the Constitution of India, which empowers only the state government to levy any tax on land which is produced hereunder: 49. Taxes on Land and Buildings 13. The applicant is of the view that a long term lease for a period exceeding 30 years tantamount to Sale of the immovable property since the lessor is deprived of the right to use, enjoy and possess the property once the said lease has been granted. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant submitted that one-time lease premium is different and distinct from lease rent. It is not a periodical payment, but a one time. It is in conceivable that on such a premium, the tax could be levied when Schedule II purposefully omits the words- Upfront premium/Salami. of the legislation was to charge GST on this one-time lease premium, then, appropriate provisions would have been inserted. 21. The applicant further submitted that if the intention of the legislation was to charge GST on this one-time lease premium, then, appropriate provisions would have been inserted. Though not being inserted, as there was a clear intent to leave out a transaction tantamount to a sale. Lease premium is not a periodical payment, but a one time. It is not, therefore, conceivable that on such a premium, the tax could be levied, assessed and recovered. 22. The applicant further submitted that one time premium under long term leases is generally regarded as equivalent to consideration for sale of land instead of rental income. 23. The applicant submitted that Ahmedabad Urban Development Authority, a governmental authority, has issued a letter claiming that GST shall not be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions. 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. 30. We observe that the Ahmedabad Urban Development Authority (hereinafter referred to as AUDA ) had carried out e-auction for leasing certain plots for a period of 99 years. The plot so auctioned could be used only for the purpose of construction of commercial projects and applicant has secured bid for plot No. 265, TP 22, Chandkheda through e-auction conducted by AUDA. They required to pay one time lease premium /salami of ₹ 35,65,85,940/-as one time long term lease premium/ salami as consideration for the said plot. The applicant is also required to pay annual lease premium of ₹ 5 per Sq. Mtr each year for 99 years as per the tender document as annual lease premium paid. 31. The first thing to be determined in the present case is whether the said transaction falls under the definition of Supply under GST. The term Supply is defined under Section 7 of the GST Act, 2017, the relevant portion is reproduced hereunder: Section 7(1) For the purposes of this Act, the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be extended or a fresh lease agreement may be entered with the lessee at the sole discretion of the Lessor for a further period 99 years or less for period as decided by Lessor, provided Lessee shall pay the lease rent at the enhance rate as may be fixed by the Lessor. 9. Plot shall be utilized only for the purpose of which it will be allotted any part of the building . Any part of the building or any unit/permissible therein cannot be soild or given on rent to anybody for the use other tan the permissible use 12. The Lessee shall not mortgage or transfer or part with permission or sublet the premises or apportion there or without the permission of AUDA. After completion of construction/development of building over the plot, the lessee shall have the right to sell/ convey/ transfer the built up space / premise to the unit holder(s)/ occupant(s) along with sub-lease/ assignment of undivided leasehold rights in the land for residue period of lease only. 22. In case of violation of any condition in the Lease Deed will automatically termed as cancelled and the lessee shall have no right for any compensation or any loss/damage. From the above facts, we obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of entry No. 41 of Notification No. 12/2017-Central Tax (Rate), date 28-6-2017 as amended by Notification No. 32/2017-Central Tax (Rate), dated 13-10-2017, only when all the conditions of the Notification are met. The text of Entry No. 41 in Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 was substituted vide Notification No. 32/2017-Central Tax (Rate), dated 13-10-2017 and same is reproduced below: One time upfront amount (called as premium, salami, cost, price, development charges or by any other name) leviable in respect of the service, by way of granting long term (thirty years, or more) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings to industrial units. [Entry before replacement] 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Association of Navi Mumbai and Neelsidhi Realties Vs. Union of India and Others. The issue before their lordship was to decide whether GST can be levied and collected on the long term lease granted by City Industrial and Development Corporation of Maharashtra Ltd. (CIDCO) for 60 years. While dealing with the issue the Hon ble High Court has observed that lease premium amount is a consideration against supply of service and is subject to Goods and Services Tax. The relevant portion of the said order is reproduced as follows:- 21. We are, therefore, of the clear view that the demand for payment of GST is in accordance with law. The said demand cannot be said to be vitiated by any error of law apparent on the face of the record. In these circumstances, we do not find any merit in the writ petition. It is accordingly dismissed. Rule is discharged. There would be no order as to costs. 36. Leasing of a private property (land, building etc.) are classifiable under HSN 9972 12 heading Rental or leasing services involving own or leased non-residential property attracting GST @ 18% (SGST 9% + CGST 9%) of Annexure to Notification No. 11/2017, dated 28-6-2017. The relevant provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant to the Ahmedabad Urban Developmet Authority (AUDA) are taxable under GST in terms of the Notification No. 11/2017-CT (Rate) dated 28.06.2017. 38. Now, we come to the second question wherein applicant has asked whether he is liable to pay GST under Reverse Charge Mechanism under Section 9(3) of CGST Act, 2017. To determine the eligibility of the applicant for payment of GST under Reverse Charge Mechanism, we refer the Section 9(3) of CGST Act, 2017. The relevant text of Section 9(3) of CGST Act, 2017 is reproduced as under: 3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 38.1 The Government on the recommendation of GST Council has issued Notification No. 13/2017-CT (rate) dated 28.06.2017 subsequently amended by Notification No. 05/2019-Ct (Rate) dated 29.03.2019. The relevant entry of the amended N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public. 38.2 In view of the aforesaid Notification No.05/2019-CT (Rate) dated 29.03.2019, applicant is liable to pay GST under reverse charge mechanism on the Onetime premium/salami and annual lease premium paid by the applicant to the AUDA. 39. In view of the foregoing, we rule as follows:- RULING Question 1. Whether the one time long term lease premium payable/paid by the Jinmangal Corporation to Ahmedabad Urban Development Authority is supply and thus liable to pay tax as pr Section7? Answer : Affirmative in view of the above discussion. Question 2. Whether Jinmagal Corporation is required to discharge pay tax under Reverse Charge Mechanism in accordance to Section 9(3) on one time lease premium payable to AUDA in light of notification No. 13/2017 as amended by 05/2019. Answer : Affirmative in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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