The West Bengal Authority of Advance Ruling (AAR) has held that Goods And Service Tax (GST) applicable on long term lease services for Setting Up Commercial Office Complex.
The bench of Dr Tanisha Dutta, Member and Joyjit Banik, Member has observed the services provided by Shyama Prasad Mookerjee Port, Kolkata (SMPK) by way of grant of long term lease of land at Taratala Road for a period of thirty years (30 years) for setting up commercial office complex to the applicant, as involved in the instant case, does not satisfy all the conditions specified in entry number 41 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended.
The applicant submitted that he has entered into a leasing agreement with the SMPK, a body incorporated under the Ministry of Ports, Shipping and Waterways, Government of India, wherein, the SMPK has agreed to lease a industrial plot of land at Taratala Road for a period of thirty years (30 years) for setting up commercial office complex. The applicant made an application on 11.10.2022 seeking an advance ruling before the West Bengal Authority for Advance Ruling (WBAAR) whether the upfront premium payable by the applicant towards the services of leasing of the land for industrial purposes by SMPK is exempted under entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017.
The WBAAR held that the services of leasing of the land for industrial purposes by SMPK to the applicant is found not to be covered under entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. Therefore cannot be treated as an exempt supply.
Read More: https://jurishour.in/water-supply-services/
The applicant sought the advance ruling on the issue whether the upfront premium payable by the applicant towards the services of 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 by SMPK is exempted under entry 41 of Notification No. 12/2017-CGST (Rate) dated 28.06.2017.
The applicant submitted that he will be setting up their corporate office building in which all the financial activities of the Applicant shall be undertaken. As per the sketch of the plot annexed with the tender document, it is clear that the plot is in an industrial area as there was another unit of India Foils Limited running at the said plot.
The applicant argued that SMPK in its official website “smportkolkata.shipping.gov.in” has declared vide notice dated 14.12.2018 bearing reference number FIN/368/B that SMPK is covered under the category of notified persons under notification number 50/2018 Central Tax dated 13.09.2018 and is required to deduct tax under section 51 of CGST/WBGST Act 2017. SMPK is therefore registered as a tax deductor in the state of West Bengal.
The applicant argues that SMPK deducts tax under section 51 of the GST Act and the control of the said Port rests with the Central Government as there is no share capital in such organisations to determine the ownership in terms of percentage of share capital. Therefore, the status of the service provider, as specified in the notification, gets satisfied in the instant case.
The applicant stated that as per the audited financial statement of SMPK it is clear that the audit of books of accounts of SMPK is done annually by Comptroller and Auditor General of India under section 19(2) of the Comptroller & Auditor General‟s (Duties, Powers & Conditions of Service) Act, 1971 read with Section 102(2) of the Major Port Trusts Act, 1963 and Section 44 (2) of the Major Port Authority Act 2021 and everywhere in the audit report the regulations of The Ministry of Ports, Shipping and Waterways (MPSW), Government of India has been referred to.
The last proviso of the condition for exemption vide entry no 41 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 requires that the lease agreement entered into by the original lessor with the original lessee for lease of such plots shall incorporate in the terms and conditions, the fact that the central tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements undertake to comply with the same. Similar Notification No. 1136 F.T. dated 28.06.2017 issued by the Government of West Bengal speaks about incorporation of exemption from payment of State tax in the lease agreement.
The AAR concluded the third condition for availing the benefit of exemption as per the aforesaid entry, i.e. whether service provider is a state Government Industrial Development Corporation or Undertaking or any other entity having 20% or more ownership of Central Government, State Government, Union territory (either directly or through an entity wholly controlled by the Central Government, State Government, Union territory) does not get fulfilled.
The Authority ruled that the Services by way of grant of long term lease of land by SMPK to the applicant for the purpose of ‘setting up commercial office complex’ as involved in the instant case is found not to be covered under entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 and cannot be treated as an exempt supply.
Case Details
Applicant’s Name: Anmol Industries Limited
Date: 29/07/2024
