In re United Breweries Limited (GST AAR Maharashtra)
Subject application is rejected as being non-maintainable as per Section 95 of the CGST Act, 2017 because the questions raised by the applicant are in respect of past and completed supply as on the date of the application and not supply, which is being undertaken/proposed to be undertaken.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, MAHARASHTRA
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively ] by M/s. United Breweries Limited, the applicant, seeking an advance ruling in respect of the following question.
Whether assignment/transfer of leasehold rights in land & structures standing there by the applicant to M/s. Greenscape IT Park LLP would qualify as ‘supply’ and liable to GST and if so, then under which section of GST Act?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION — AS PER THE APPLICANT FACTS:
The submissions made by M/s United Breweries Limited, the Applicant, are as under:-
2.1 The Applicant, engaged in the manufacture of Beer & bottled drinking water had a lease hold land measuring 24,300 Sq. mtrs., which was leased out to them by the Maharashtra Industrial Development Corporation (MIDC). The applicant was holding this long term leased property, after obtaining necessary approvals, permissions, Commencement certificate from MIDC/NMMC and concerned Authorities, have constructed Industrial structures thereon as per the approved building Plans. The applicant had also obtained building Completion Certificate from MIDC.
2.2 The applicant has executed an agreement dated 24.12.2020 known as “Deed of Assignment Cum Transfer” by virtue of which applicant have agreed to transfer its rights over the land & structures standing thereon to M/s. Greenscape IT Park LLP (‘Greenscape’ for short) for an un-expired lease period viz. more than 30 years for an agreed consideration of Rs. 72, 90, 00,00%.
2.3 The Applicant had also obtained NOC and complied with all terms and conditions as mentioned in MIDC Order dated 02nd March 2020 before execution of “Deed of Assignment Cum Transfer”.
B. STATEMENT CONTAINING APPLICANT’S INTERPRETATION OF LAW APPLICANT’S INTERPRETATION
2.4 The applicant submits that a taxation statute has to be construed strictly & any ambiguity must be construed in favour of assessee. Under GST Laws, since the charge is on supply of Goods or Services, to attract the levy the item being supplied should satisfy the test of goods or services.
2.5 The terms ‘goods’ defined in section 2(52) of the CGST Act, 2017 and the term ‘service’ is defined in Section 2(102) of the CGST Act, 2017. Further, the term ‘supply’ as per Section 7 of the CGST Act, 2017.
2.6 A lease is a grant of right to enjoy the property as per Section 105 of the Transfer of Property Act, 1882.
2.7 An assignment is a transfer of any right. The meaning of the term ‘Assignment’ as per ‘Black’s Law Dictionary’ is as under:
“The act of transferring to another all or part of one’s property, interest, or rights. A transfer or making over to another of the whole of any property, real or perpetual, in possession or in relation, or of any estate or rights therein. It includes transfers of all kinds of property (Higgins v. Monokton, 28 Cal. App 2nd 723, 83 F 2d 516, 519) including negotiable instruments. The transfer by a party of all of its rights to some kind of property, usually intangible property such as rights in a lease, mortgage, agreement of sale or a partnership. Tangible property is more often transferred by possession and by instruments conveying title such as a deed or a bill of sale. ………..
2.8 It can be seen from the above that assignment is transfer of one’s property, interest or rights. In general, transfer of rights in real property or Personal property to another that gives the transferee the rights that the owner or holder of the property i.e. the transferor had prior to such transfer.
2.9 A co joint reading of the above makes it clear that there is no sale or supply of goods in this case and the transaction relates to transfer of a right to enjoy immovable property.
2.10 It can be seen from the definition of immovable property as per Section 3(26) of General Clauses Act, 1897, the phrase ‘benefits to arise out of land’ is relevant to the instant case. Benefits arise out of land is nothing but the interest in land.
2.11 The applicant submits that lease simplicitor alone should attract levy of GST. Assignment of leasehold rights on land, on the other hand, is nothing but the transfer of immovable property akin to the sole of land and buildings and no GST is leviable on such assignments.
2.12 ‘Sale’ means the transfer of property or title for a price. Assignment of the leasehold rights effectively transfers possession, title and interest to the assignee for a price. It is nothing but akin to sale of immovable property and out of the purview of GST.
2.13 It is further submitted that the very nature of service excludes circumstances in which title is transferred in a thing (movable or immovable). Hence, assignment can never be construed as service unless it is expressly deemed to be so in the statue for the purposes of taxation, subject, of course, to the validity of the said provision if it deems it so. Renting of immovable property is one such instance that is as a supply of service by expressly including it as a supply of service by the Act. In the absence of such inclusion, since assignment of lease amounts to transfer of a right to enjoy immoveable property and amounts to creation of an interest in the property, it is outside the scope of taxation of under the Act.
2.14 The applicant submits the decision of Hon’ble Authority of Advance Ruling, West Bengal in the case of IN RE: M/S ENFIELD APPARELS LTD. cannot be referred in as much as:
i. It is specific to the facts of that case;
ii. The said ruling is binding only intro party thereto;
iii. The implications of the provisions of the Transfer of Property Act, 1882, which have a direct bearing on the issue in this case have neither been canvassed nor considered.
Additional submission dated 09.11.2021:-
2.15 ‘Supply includes all forms of supply other than supply specified in Schedule Ill of the CGST Act. The heading / title of Schedule Ill is “Activities or Transactions Which Shall Be Treated Neither as a Supply of Goods or a Supply of Services”. Given this, the activities/ transactions covered under Schedule Ill cannot be treated as ‘goods’ or ‘services’. Accordingly, actives specified in Schedule III of CGST Act are outside the purview of GST. Sr. no. 5 of the said Schedule III prescribes as under:
“5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building’
2.16 Given the aforesaid, GST is not leviable on:
a. Sale of land
b. Sale of building (post Completion Certificate)
In the instant case, there is transfer of completed building with value of INR 29,75,67,480/- (on which Stamp Duty is calculated)
2.17 Further, the principle of law is that what is exempted cannot be taxed indirectly. It is a well settled principle that if there is specific entry provided in the statute then the specific provision would prevail over the other general provision.
2.18 Reliance in this regard in placed on the case of CCE, Ludhiana v. Dr. Lal Path Lab (P) Ltd. [2007 (11) STT 307 (Pun]. & Har.) = 2007 (8) S.T.R. 337 (P & H)]
2.19 In the instant case as a completed ‘building’ was transferred, the transfer of the said building should not be subject to GST.
Transaction is covered under Not. No. 41/2017-GST
2. 20 Not. No. 12/2017-CT, as amended from time to time, provides as under:
2.21 It may be noted that to avail the exemption following conditions need to be satisfied:
