In re Hazari Bagh Builders Pvt. Ltd. (GST AAR Rajasthan)
The Applicant Company is registered in the State of Rajasthan and having GSTIN in State of Rajasthan. The Applicant 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 Applicant 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 in the present case is whether the amount paid prior to 29.03.2019 in pursuance to the lease agreement of 99 years executed on 08.11.2019 are exempt from levy of GST or not;
Held by AAR
We observe that, RLDA being the statutory authority of Government of India is providing services by way of renting of immovable property to a registered person (i.e. the applicant), and renting of immovable property includes leasing also, therefore the said services are falling under the purview of Reverse Charge Mechanism. The applicant being the recipient of service of leasing or renting of immovable property is liable to pay GST under RCM.
The applicant has further made a contention that leasing services provides by RLDA to them is exempt from GST as provided under Serial No. 4IB of Notification 12/2017- Central Tax (Rate) dated 28.06.2017 as amended vide Notification 04/2019-Central Tax (Rate) date 29.03.2019.
Applicant has also made a contention for applicability of Serial No. 41 of Exemption Notification 12/2017-CT (R) dated 28.06.2017 (as amended) read with Circular No. 101/20/2019-GST dated 30.04.2019, which specifies four essential conditions as discussed below-:
– 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;
– entity having 20 per cent, or more ownership of Central Government, State Government, Union territory;
– to developers in any industrial or financial business area
We observe that, elements regarding long term lease (present lease is 99 years) and entity having 20% or more of ownership of Central Government are satisfied (RLDA being the statutory body of Government of India).
But, we find that, two other conditions namely, industrial plots or plots for development of infrastructure for financial business and that to award such lease to developers in any financial business area needs examination. We find that the RLDA is not awarding industrial plots to applicant but 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/State Government in reference to some scheme of development. These plots are for a specific purpose and if plot-holders in future tries to engage in some other work or lease conditions of agreement are breached, then the developer has every right to eject that plot-holder. In the present case, RLDA is just providing a parcel of land which is in its ownership therefore; the lease of the same cannot be categorized as meeting condition of industrial plot and for the purpose of financial business, RLDA has leased ordinary plots for residential purpose consequently the conditions of the said notification are not satisfies. Therefore, the said notification is not applicable in the instant case.
Due to above 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.
Read AAAR Order: Lease with RLDA for a period of 99 years not exempt from GST: AAAR
FULL TEXT OF ORDER OF BEFORE THE AUTHORITY OF ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order.
