In re Chennai Metro Rail Ltd. (GST AAAR Tamilnadu)
In this case entire land had been acquired by the appellant and the same had been acquired for business purposes only. The appellant after acquisition of the land had granted shared- access to the pathway with no grant of right of occupation and possession and the activity is in the genre of licence extended for a specific period against payment of rentals.
In the case of renting or leasing of the property, the owner (appellant in this case) will not have the right to use the land/pathway involved as ‘renting/Leasing’ involves transfer of the right to enjoy the property to the lessee and the lessor does not retain right to enjoy the property during the lease period.
In the instant case, it is not a lease of the pathway but only rights are granted to the land owner by the appellant for the shared access. It is seen that the grant of access to the pathway is a right given by them to the landowner. This activity of agreeing to grant rights for shared access of the pathway is an “act of agreeing to tolerate an act’ and is classifiable under SAC 999794 under “other miscellaneous services/Agreeing to tolerate an act’ and is taxable to 9% CGST and 9% SGST as per SI.No.35 of Notification 11/2017 CT(Rate) dated 28.06.2017 as rightly held by the Lower Authority.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, TAMILNADU
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
The subject appeal is filed under Section 100(1) of the Tamilnadu Goods & Services Tax Act 2017/Central Goods & Services Tax Act 2017 (hereinafter referred to the Act’) by M/ s. Chennai Metro Rail Ltd (hereinafter referred to as `AppeIlanr). The appellant is registered under GST vide GSTIN33AADCC2233K1ZO. The appeal is filed against the Order No.26/ARA/2020 dated 12.05.2020 passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the appellant.
2.1 The appellant has stated that they had acquired a portion of the property (including the land which is now leased out to the owner) for public purpose from Dr. K. Prema, (hereinafter referred to as the Landlady) D/o Shri Late
T. Kanagasabapathi residing at Plot No.2045 E, 2nd Avenue, Anna Nagar, Chennai- 600040 in Thirumangalam, Anna Nagar on payment of adequate compensation. As per clause 4 of the agreement entered into between the appellant and Dr. K. Prema on 21-08-2019, Dr.K. Prema is entitled to use the passage with 3 Meter width and 14 Meter length measuring 452 out of the acquired land for shared access purpose for 35 years. Without the access the Landlady would be unable to, come out to the road and make her ingress and exit to and from the house. In short, the access to pathway is required for any movement and connection with the world outside the residential house of the Landlady. Thus, unless the right to pathway was sold along with the land there was no way the Landlady would be able, to live in her residential house and the acquisition of the land would not have been made possible. They have stated that the pathway access was a covenant running with the land and was inseparable from the acquisition of the land by them. From the sale price agreed with the Landlady, it was mutually determined that the Landlady would pay a sum of Rs.60,40,800 towards enduring right to access to the pathway land sold to them. The appellant felt that the right to pathway enabling the Landlady to access the road and thus the outside world was a covenant running with the land and hence the sum, charged for the access was an element of the price for the sale and purchase of the land. The sale and purchase of land is not subject to the levy of GST, It was also felt that the grant of access to pathway to the residential dwelling was exempt from GST under SI no 12 of Notification 12/2017 since any leasing in connection with residential property was exempted therein.
2.2 The Appellant made an application to ORIGINAL AUTHORITY on the following question:
Whether leasing of pathway to a person to her/his dwelling unit by CMRL is taxable under GST?
3. The Original Authority has ruled as follows:
The leasing of pathway by the appellant to Dr. Prema (lessee) by way of shared access of the Non-residential property held by the appellant is taxable under GST.
4.1 Aggrieved by the above decision, the Appellant has filed the present appeal.
In the grounds of appeal, they have inter-alia, stated that:
> The Authority for Advance Ruling (AAR, for short) has failed to consider and recognize that the grant of access to pathway to connect with the outside world was a covenant running with the land and inseparable from the sale and purchase of the land which was not a supply to be taxed under GST.
> The AAR have admitted vide para no 7.1 of the Ruling that the consideration for the access to pathway was deducted from the price of the land. Therefore, the AAR ought to have considered that the grant of access to pathway was an integral and inseparable part and parcel of the acquisition of land which was outside the scope of the levy of GST.
> The AAR has failed to recognize that the pathway land which was the subject of permanent access to the Landlady was to be used for ingress into and exit from the residential house of the Landlady and constituted part and parcel of the residential dwelling unit, which was not liable to be, taxed under GST.
> The AAR has failed to provide any evidence or basis for its ruling that the provision for the access to pathway as an integral part of the sale and purchase of the land, amounted to the service of agreeing to tolerate an act.
> The sale and purchase of the land in issue did not have any provision for toleration of any act.
> The provision of access to pathway cannot be construed as agreeing to tolerate an act.
> Without prejudice to any of the grounds taken, it is submitted that the supply of easement as a taxable supply will arise, if at all, only independently of the sale and purchase of land. Any grant of easement incidental or integral to the sale and purchase of the land at the time when such sale and purchase of the land is made cannot he brought to the levy of GST as such easement would be an integral part of the immovable property which is beyond the pale of the law of GST.
> The supply of easement contemplated as a service under schedule II of the CGST Act would arise, if at all, only when such supply is provided or rendered separately and independently of the sale and purchase of the land.
> In the case of the Applicant herein, the easement was integral, inseparable and inherent to the sale and purchase of the land. The two cannot he segregated and without each other the sale and purchase of land would not have materialized.
> The consideration for access to pathway is part and parcel of the price of acquisition of immovable property by APPELLANT in public interest and hence not liable to be taxed under GST.
> Without prejudice to the other grounds, it is submitted that the Pathway with its access to the Landlady is to be considered as part of the
residential dwelling of the Landlady. Any renting or leasing of residential property is exempted from tax under serial no 12 of Notification 12/2017
PERSONAL HEARING:
5.1 Due to the prevailing PANDEMIC situation, the appellant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital mode vide e-mail dated 23rd December 2020. The appellant provided their consent to be heard through virtual mode. They were extended the opportunity to be heard virtually on 22nd January 2021 and the appellant sought adjournment as their advocate was not available on the said date. They were extended an opportunity to he heard on 501 February and the hearing was held virtually on 50, February 2021. The Authorized representative appeared for the hearing virtually. They furnished written submission (vide email) which was taken on record. They stated that:
1. Easement is not contemplated in Schedule II of the CGST/TNGST Act 2017.
2. The purchase and acquisition is a composite supply with ‘Supply of Land’ being ‘Principal Supply’ and grant of pathway access ‘Ancillary Supply’ . They stated that they will furnish the minutes of the Lok Adalat settling the land acquisition proceedings.
5.2 The applicant vide their email dated 08.02.2021 submitted the following points put forth in the Virtual Hearing and requested to record in the minutes.
