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Promoter is liable to pay GST under RCM on one time premium and monthly rentals for commercial lease of 99 years: Rules AAR 

Held by AAR

Leasing of a private property (land, building etc.) are classifiable under HSN 997212 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 provision of the Annexure and the Notification is reproduced, as below:-

Annexure : Scheme of Classification of Services

Chapter, Section, Heading or group	Service Code (Tariff)	Service Description
Group 99721		Real estate services involving owned or leased property
	9972 12	Rental or leasing services involving own or leased non-residential property

Notification No. 11/2017, dated 28-6-2017

Chapter, Section or Heading	Description of Service	Rate (per cent.)
Heading 9972	(i) Services by the Central Government, State Government, Union territory or local authority to governmental authority or government entity, by way of lease of land.	Nil
	(ii) Supply of land or undivided share of land by way of lease or sub-lease where such supply is a part of composite supply of construction of flats, etc. specified in the entry in column (3), against serial number 3, at item (i); sub-item (b), sub-item (c), sub-item (d), sub-item (da) and sub- item (db) of item (iv); sub-item (b), sub-item (c), sub-item (d) and sub-item (da) of item (v); and sub-item (c) of item (vi). Provided that nothing contained in this entry shall apply to an amount charged for such lease and sub-lease in excess of one third of the total amount charged for the said composite supply. Total amount shall have the same meaning for the purpose of this proviso as given in paragraph 2 of this notification.	Nil
	(iii) Real estate services other than (i) and (ii) above.	9

In view of the above discussion, we rule that the Onetime premium/salami and annual lease premium paid by the applicant to the AUDA for leasing of commercial plot/land is covered under supply of service in terms of Section 7 (1) of CGST Act, 2017. Accordingly, the said Onetime premium/salami and annual lease premium paid by the applicant 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.

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.

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 Notification No. 05/2019-CT (Rate) dated 29.03.2019 is reproduced as under:

Category of Supply of Services	Supplier of service	Recipient of Service
(2)	(3)	(4)
Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter.	Any person	Promoter.

In the clause (j) of the explanation, the term “promoter” has been defined as under:

(j) the term “promoter” shall have the same meaning as assigned to it in clause (zk) under section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).

Clause (zk) under section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) defines the term ‘promoter’, as under:

(zk) "promoter" means,-

(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or

(ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or

(iii) any development authority or any other public body in respect of allottees of-

(a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or

(b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or

(iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or

(v) any other person who acts himself 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.

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.

RULING

Question 1. Whether the one time long term lease premium payable/paid by the applicant 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 Applicant 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 view of the above discussion.

Question 3. Whether the annual lease premium payable/paid by the applicant is supply?

Answer : Affirmative in view of the above discussion.

Question 4 Whether applicant is required to discharge/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 Not. No. 05/2019.

Answer : Affirmative in view of the above discussion.

good

shall this act applicable for premium amount charged for just renewal of lease.no contruction of property is done,

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