9911796707
TMI Blog2025 (2) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... g Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression "GST Act" would mean the CGST Act and the WBGST Act both. 1.2 The TCG Urban Infrastructure Holdings Private Limited is a real estate development and investment company engaged in development, construction, leasing and sale of commercial properties and providing the fit-outs and related infrastructure on hire to various tenants of the properties held by Bengal Intelligent Parks Private Limited (BIPPL) and BIP Developers Private Limited (BIPDPL), subsidiaries of the applicant in India and providing related consultancy services. TCG Urban Infrastructure Holdings Private Limited wishes to understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant. Later on, by way of a scheme of amalgamation BSPL is merged with the applicant. 2.2 The applicant states that by a Deed of Lease, the Governor of the State of West Bengal has granted to West Bengal Electronics Industry Development Corporation Limited (WEBEL) a lease for a period of 999 years of a plot of land in Block EP and GP in Sector V of Bidhannagar in the district of North 24 Parganas. The lease was granted with the object of developing the demised land for setting up of Electronics Industries. WEBEL has divided the demised land into diverse plots and has allotted the same for the purpose of setting up Electronics Industries. 2.3 The applicant states that WEBEL, by issuance of an Allotment Letter and by entering into the Deed of Sub-Lease, granted a sub-lease of Plot Nos. A2, M2 and N2 for a term of 90 years exclusively for the purpose of setting up of an electronics industry. This sub-lease was granted to the Bengal Intelligent Parks Private Limited (BIPPL) with an option to WEBEL to renew the sub-lease before it's expiry for two further terms of 90 years each, provided BIPPL did not breach the covenants of the sub-lease. 2.4 Under the deed of sub-lease, BIPPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ension system for the building common areas and feeder up to the tenant point * Power back-up/ DG set for essential equipment or as decided by the BIPPL/ occupants; * Electrical fixtures and fittings for common areas only; * Building water system including different pumping system * Building sprinkler firefighting system * Sewerage treatment plant and system for liquid waste * Any other specialized fit out, if needed by BIPPL 2.8 The applicant states that based on the aforesaid agreement, the applicant started entering into the agreements with the licensees for providing the fitted assets on hire basis. In this regard, it is important to note that the applicant after entering into the aforesaid agreement with BIPPL installed the mentioned assets and created the required infrastructure in common areas of 'Bengal Intelligent Park' as well as up to entry point of the tenant's bare shell premises. The tenant shall install, at its sole responsibility and cost, all fixtures and fittings within its premises. On expiry of the sub-lease agreement between the tenant and BIPPL, the tenant has an option to remove such fixtures and fittings which were originally installed by them a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is condition. DG set emergency power supply on chargeable and availability basis as per agreed terms. Part II (Fully functional assets of standard quality for common areas) Electrical equipment comprising electrical wiring, distribution systems and electrical switchboard and luminaries (including fixtures and fittings excluding lamps). DG set with accessories. Sprinkler system comprising fire detectors, alarm panel, sprinklers pipe and sprinklers. Fit outs as per warm shell provision. 2.12 Current Practice followed by the Applicant The applicant states that since the inception of GST with effect from 01.04.2017, the applicant has been issuing tax invoices to the various tenants for hire of assets at a rate of @28% [Central Tax @14% and State Tax @14%] under SAC 997314 and accordingly deposited the relevant tax on regular basis. While determining the GST rate in respect of hire of assets, the applicant considered various provisions of the CGST Act, 2017. In the instant case, admittedly the tenant takes on hire multiple assets for a single price from the applicant as is evident from the relevant extracts from the agreement with Sun Knowledge Private Limited dated 09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a principal supply. In the instant case, the Applicant provides individual supply of assets, and the element of any principal supply is missing. Hence, supply of assets in the instant case cannot be treated as composite supply. The applicant further states that the term mixed supply is defined as per Section 2 (74) of CGST Act, 2017 which is as follows: * that the supply is consisting of two or more individual supplies of goods or services, or any combination thereof; * that such different supplies are made in conjunction with each other by a taxable person for a single price; * that such supply does not constitute a composite supply. As in the instant case, the applicant provides individual supply of assets which are independent of each other at a single price such supplies should be treated as mixed supply. Tax liability on mixed supply has been laid down in Section 8(b) of the CGST Act, 2017 which is as follows: "(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax". In the instant case, the air-conditioning system attracts the highest GST rate of 28%. Therefore, the GST r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer supply would attract tax @18% under serial number 17 (viii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06,2017. ITC shall also be available on the tax charged by the supplier subject to the fulfilment of all the conditions under Section 16 of the CGST Act, 2017. 2.16 Divergent Approach/ Alternative View After obtaining the ruling of WBAAR as mentioned above, the applicant decided to relook into this matter and discussed the same with various experts. As a result, an alternative view has been formed in respect of the nature of services provided by the applicant to the tenants. The view is elucidated below: The applicant submits that hitherto, the discussion has primarily focused on the GST rate applicable on hiring of assets. Now, the applicant raises a significant question: whether the applicant recovers hire charges for providing assets per se or for the creation of the basic infrastructure and facilities within the building. The applicant submits that the intention of the BIPPL to engage the applicant to provide the assets becomes apparent from the agreement dated 16th November 2005 as mentioned in Para 11 above. Para G of the said agreement makes it clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided in common areas is for the use of all tenants and visitors. Therefore, it can be inferred that the assets provided in common areas as mentioned in Part II of the Second Schedule to the Agreement as mentioned above does not mean that the individual assets are provided to the Sun Knowledge Private Limited. Rather, the applicant provides the facilities for all its tenants by installing various assets in common areas and recovers hire charges for the same from each tenant including Sun Knowledge Private Limited. 2.18 Let us also analyse the assets provided for the sub-lease space. As outlined the applicant furnishes fully functional assets for the sub-leased space. The specific functionalities of these assets are delineated below: Electrical equipment up to tap off box at floor rise along with light fixtures and fittings in as is where is condition: The applicant states that an electric installation within the building includes various components such as machines, transformers, protective devices, wiring systems, other accessories and equipment designed for the purpose of providing electrical energy. In the existing system, the transformer is positioned in a particular p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, the applicant provides that inside the building, there is a central air conditioning plant in order to provide air conditioning facilities and supply of cooling air to each floor through AHU Duct systems, catering to the needs of individual tenants. The AHU is located in each floor wherefrom the tenants are responsible for installing the ducting's, diffusers etc. to its premise. Consequently, no individual assets are provided to tenants, instead, they are furnished with an air-conditioning system, enabling them to install their own units. DG set emergency power supply on chargeable and availability basis as per agreed terms- The applicant states that there are one or two common DG sets located on the ground floor of the building to serve as an emergency power backup. The facility is available to all the tenants within the building, the benefit for which is enjoyed by all. 2.19 From the above explanation, it is clear that the applicant in case of Sun Knowledge Private Limited has never offered any independent assets or fit outs separately to tenants. Instead, they create a cohesive set of infrastructure elements that are essential for the overall functioning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security 2.22 The applicant submits that from the definition of 'Support Services' during the erstwhile service tax regime as mentioned above, it is apparent that support service includes any infrastructural or operational support that may be carried out by the entities itself but may be obtained as services by outsourcing from others for any reason. In the instant case, BIPPL, being a developer of the building, should create proper infrastructure support and facilities in the said building. However, the same is outsourced to the applicant. The applicant is responsible for creating proper infrastructure and a facility in the building as already mentioned above and recovers hire charges for the same from the tenants. Therefore, we are of the considered view that hiring of assets should be classified as support under SAC 998599 i.e., other support services nowhere else classified and the GST rate is 18%. Additional Submission on 17.09.2024 2.23 The applicant seeks an advance ruling on whether the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be considered as the services provided directly in relation to immovable property or physical premises. (ii) Not Directly Related to Immovable Property: * The assets provided by TCGUIHPL are integral to the infrastructure of the building and are not standalone movable properties. * The services involve creating a cohesive set of infrastructure elements essential for the overall functionality of the building. (iii) Not the actual owner of the property: * Throughout the provision of the infrastructure services, TCGUIHPL does not own property and is not the actual owner. TCGUIHPL independently handles, monitors and maintains the infrastructure of the property. (iv) Support Services Classification: * The comprehensive nature of the services aligns more closely with the definition of support services under SAC 998599. * Support services include infrastructural support which is precisely what TCGUIHPL provides to its tenants. (v) GST Rate: * As support services under SAC 998599, the applicable GST rate would be 18%, which aligns with the nature of the comprehensive service provided. 2.25 Decision provided in Advance Ruling by Sun Knowledge Private Limited * Air c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the applicant is a real estate development and investment company engaged in development, construction, leasing and sale of commercial properties and providing the fit-outs and related infrastructure on hire to various tenants of the properties held by Bengal Intelligent Parks Private Limited (BIPPL). It is reiterated that in a Deed of Lease, the Governor of the State of West Bengal has granted West Bengal Electronics Industry Development Corporation Limited (WEBEL) a lease for a period of 999 years of a plot of land in Block EP and GP in Sector V of Bidhannagar in the district of North 24 Parganas. The lease was granted with the object of developing the demised land for setting up of Electronics Industries. WEBEL has divided the demised land into diverse plots and has allotted the same for the purpose of setting up Electronics Industries. This sub-lease was granted to the Bengal Intelligent Parks Private Limited. The applicant (erstwhile known as "Boulevard Services Private ltd-BSPL) entered into an agreement with BIPPL for setting up of exquisite infrastructure and provide space and facilities to several hi-tech firms, companies, corporations etc., where the permission was gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air to each floor through installed Air Handling Unit (AHU) Duct systems. Also, there is common DG set in order to provide emergency power back up for each floor. There are also fit outs, assets like electrical equipment, fire extinguishing sprinkler system etc. installed to provide required facilities and services through such assets to the said sub-leased space. Lessees/tenants have no control/title over the said fit outs and assets, but have the right to use the facilities and services of such fit outs, fixed assets and services on payment of agreed rate as hire charges. As per the agreement between TCGUIH and Sun Knowledge Pvt Ltd, the legal possession of the assets shall be with TCGUIH at all times. Sun Knowledge Pvt Ltd enjoys only right to use the said fit outs and assets, facilities/ services till the period of the agreement. 4.5 In its order vide no 29/WBAAR/2023-24 dated 31.01.2024, this authority has held that supply from TCGUIH to Sun Knowledge Pvt Ltd failed to feature as composite supply but can be regarded as mixed supply. Since the instant case deals with the same fact and the applicant in its application has also referred to the aforesaid case of Sun Knowledge Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price. We are of the view that all the conditions specified in clause (74) of section 2 of the GST Act get satisfied in respect of the instant supply and we, therefore, hold the supply to be a mixed supply. 1.22 So, in order to determine the rate of tax of the instant supply, it is necessary to ascertain the supply that attracts highest rate of tax. As per serial number 17 (iii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration attracts same rate of tax as on supply of like goods involving transfer of title in goods. We find that the supplies received by the applicant include hiring of air conditioning system up to the floor Air Handling Unit with existing ducting's and diffusers, sprinkler system comprising fire detectors for true ceiling. As per serial number 119 of Schedule IV of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, as amended (corresponding West Bengal State Notification No. 1125 F.T. dated 28.06.2017), 'Air-conditioning machines, comprising a motor-driven fan and elements for changin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to those lessees. This authority has referred to the cases of Solid and Correct Engineering Works [2010 (252) E.L.T. 481 (S.C.)], and Varachha Co-op. Bank Ltd [2023] 156 taxmann.com 4 (AAAR-GUJARAT) [04-10-2023] to express the view that permanently installed machineries to BIPPL lost nature of movable properties and cannot be considered as 'goods' in GST. 4.7 It is learnt from the Scheme of Classification of Services as annexed to the rate notification that SAC 99731 describes services of "Leasing or rental services concerning office machinery and equipment (except computers) without operator". Rate of tax of leasing or rental services under Heading 9973 has been specified in serial number 17 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (corresponding West Bengal State Notification No. 1135 F.T. dated 28.06.2017), as amended from time to time. As on date, the said entry reads as under: Sl. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 17 Heading 9973 (Leasing or rental services, without operator) (i) omitted (ii) Temporary or permanent transfer or permitting the use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th publishers, producers, etc.; issue of reduced-price coupons and gift stamps; management services for copyrights and their revenues (except from films); management services for rights to industrial property (patents, licences, trademarks, franchises, etc.); auctioning services other than in connection with legal procedures; reading of electric, gas and water meters; data preparation services; specialized stenotype services such as court reporting; public stenography services; other business support services not elsewhere classified" We find that the description of services as scripted in the explanatory note under heading 998599 does not vouch for services provided by the applicant. 4.9 A lease is a contractual arrangement where the lessee (user) pays the lessor (Owner) for use of an asset like property, building and vehicles, industrial machineries etc. are common assets that are leased. There is lease agreement which is commonly called as contract between two parties, the lessor and the lessee. The lessor is the legal owner of the asset. The lessee obtains the right to use the asset in return for regular rental payments. The lessee also agrees to abide by various conditions r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a to cloud computing service providers located outside India. The issues which have been clarified in the circular are found to be as under: (i) Whether data hosting service provider qualifies as 'Intermediary' between the cloud computing service provider and their end customers/users/subscribers and thereby whether the place of supply of the same is to be determined as per section 13(8)(b) of IGST Act. (ii) Whether the data hosting services are provided in relation to goods "made available" by recipient of services to service provider for supply of such services and thereby the place of supply of the same is to be determined as per section 13(3)(a) of IGST Act; (iii) Whether the data hosting services are provided directly in relation to "immovable property" and thereby the place of supply of the same is to be determined as per section 13 (4) of IGST Act; 4.13 We find that section 12 the IGST Act, 2017 deals with place of supply of services where location of supplier and recipient is in India. On the other hand, section 13 of the IGST Act deals with place of supply of services where location of supplier or location of recipient is outside India. The above-referred circular h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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