No GST exemption on sub-leasing of ‘Industrial Development Corporation land’ by SPV developer to its members: Guj. AAR

Case Details: Authority for Advance Rulings, Gujarat Gujarat Hira Bourse, In re - [2021] 133 taxmann.com 77 (AAR - GUJARAT)

Judiciary and Counsel Details

• • Sanjay Saxena and Arun Richard, Member
  • Hardik Modh, Nitin Gheewale and Arjun Akruwala for the Applicant.

Facts of the Case

The applicant was engaged in development of Gems and Jewellery Park. It executed a lease deed with state industrial development corporation for 99 years for acquisition of land. The land would be further sub-leased to its members (industrial units). It would receive contribution from its members who were well known Gem and Jewellery exporters, which would be used towards Infrastructure cost of facilities for establishment of Bourse for promotion of export of Diamond, Gems, Pearl and Jewellery. It filed an application for advance ruling to determine taxability of contribution received from sub-leasing activity.

AAR Held

The Authority for Advance Ruling observed that in the instant case the applicant was engaged in leasing services. As per Entry No. 41(Heading 9972) of Notification No. 12/2017- Central Tax(Rate) dated 28-6-2017, exemption is provided on one time upfront amount (called as premium, salami, cost, price, development charges or by any other name) leviable in respect of the service, by way of granting long term (thirty years, or more) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings to industrial units. In the instant case, the applicant acquired the lease of the plot from State Government Industrial Development Corporation but further sub-leased it to industrial units. Therefore, consideration paid by industrial units to the applicant would not be exempt and liable to GST.

Case Review

• • Star Industries v. Commissioner of Customs (Imports) [2015] 63 taxmann.com 131/52 GST 922 (SC);
  • Uttam Industries v. CCE [2011] 31 STT 22 (SC);
  • CWT v. Hashmatunissa Begum, 1989 (40) E.L.T. 239 (S.C.);
  • Hemraj Gordhandas v. HH Dave 1978 (2) ELT (J350) (SC) and
  • Rajasthan SPG. and WVG. Mills Ltd. v. CCE 1995 (77) ELT 474 (SC) (para 16.3) followed.
  • State of West Bengal v. Calcutta club Ltd. [2019] 110 taxmann.com 47/76 GST 614 (SC) (para 20.1) and
  • Bowring Institute, In re [2021] 127 taxmann.com 166/86 GST 608 (AAR – Kar.) (para 21) distinguished.

List of Cases Referred to

• • Star Industries v. Commissioner of Customs (Imports) [2015] 63 taxmann.com 131/52 GST 922 (SC)
  • Uttam Industries v. CCE [2011] 31 STT 22 (SC)
  • CWT v. Hashmatunissa Begum, 1989 (40) E.L.T. 239 (S.C.)
  • Rajasthan SPG. and WVG. Mills Ltd. v. CCE 1995 (77) ELT 474 (SC) (para 16.3)
  • State of West Bengal v. Calcutta club Ltd. [2019] 110 taxmann.com 47/76 GST 614 (SC) (para 20.1)
  • Bowring Institute, In re [2021] 127 taxmann.com 166/86 GST 608 (AAR – Kar.) (para 21)