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THE JHARKHAND GOODS AND SERVICES TAX ACT, 2017. Advance Ruling
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Body Advance Ruling Order No. JHR/AAR/2018-19/02, Dated 14th September, 2018

JHARKHAND AUTHORITY OF ADVANCE RULING

GOODS AND SERVICES TAX

DIVISIONAL OFFICE OF STATE TAX, CIVIL COURT COMPOUND,

NEAR JAIPAL SINGH STADIUM, RANCHI, 834001

Sri Pradhuman Badri Prasad Meena,

Joint Commissioner,

  Member (Central Tax)
Sri Ram Chandra Prasad Barnwal,

Joint Commissioner

  Member (State Tax)
Name and address of the applicant   TANGERINE SKIES PRIVATE LIMITED

Registered Address: RIADA BHAWAN, PLOT NO. 2B, NAMKUM INDUSTRIAL AREA, LOWADIHA, RANCHI, GUMLA, JHARKHAND-834001

Correspondence Address:

MATRIX CLOTHING COMPLEX, KHANDSA ROAD, VILLAGE-MOHAMMADPUR,

GURGAON-122001(HARYANA)

GSTIN of the applicant   20AAGCT3424Q1Z8
Application No. and Date   Advance Ruling/ SGST & CGST/2017-18/AR/02
Clause(s) of Section 97(2) of ((CGST/SGST/UGST Act, 2017)) under which the question(s) raised   (ii) Applicability of a notification issued under the provisions of the Act

(v) determination of the liability to pay tax on any goods or services or both

Date of Personal hearing   02-08-2018
Present for the applicant   Mr. Kapil Mahani and Mr. Arvind Modi

(Authorized Representatives)

Note: Under Section 100 of the JGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of JGST Act 2017, within a period of 30 days from the date of service of this order.

The applicant M/s Tangerine Skies Private Limited (herein after referred to MHTL) having GSTN No- [20AAGCT3424Q1Z8] is a company registered under companies Act, 2013 . The Company engaged in manufacturing and exporting of Readymade Garments having its manufacturing plant at Gurgaon.

1. To expand its operations, the Company has taken land from Ranchi Industrial Area Development Authority (RIADA) on lease for 30 years and is planning to set up an industrial unit for manufacturing of "Manufacturing of Garments".

2. As per the lease terms lessee is required to pay the upfront premium, which shall be total amount to be paid for lease. However, as per the terms of RIADA if the company is into mega IT industry/textile industry programme of RIADA then the company shall have option to pay land premium in 10 equal installments over a period of 5 years. Since the Applicant qualifies all the conditions for availing this scheme, the upfront premium shall be paid by the applicant in 10 installments over a period of five years.

3. The Lessor and lessee has entered in lease arrangement and relevant terms and conditions of Lease Deed which are relevant for kind consideration are reproduced below:-

i. The period of tenure of lease in respect of the scheduled land/shed shall be for a period of 30(thirty) years from the date of allotment.

ii. Rs. 22,48,814.00 plus taxes shall be payable as first installment of premium of land followed by 9 installments payable over a period of next four and half year.

Installment Due Date Amount (In Rs.) Net Amount
1st installment 01.08.2017 Rs. 22,48,814.00 + Applicable Taxes @ 15% Rs. 3,37,322.00 Rs.25,86,136.00
2nd installment 01.02.2018 Current Circle Rate + Applicable Tax  
3rd installment 01.08.2018 Current Circle Rate + Applicable Tax  
4th installment 01.02.2019 Current Circle Rate + Applicable Tax  
5th installment 01.08.2019 Current Circle Rate + Applicable Tax  
6th installment 01.02.2020 Current Circle Rate + Applicable Tax  
7th installment 01.08.2020 Current Circle Rate + Applicable Tax  
8th installment 01.02.2021 Current Circle Rate + Applicable Tax  
9th installment 01.08.2021 Current Circle Rate + Applicable Tax  
10th installment 01.02.2022 Current Circle Rate + Applicable Tax  

iii. In addition to the land premium/upfront premium, annual rent shall be Rs. 5,000/-per acre per annum which amounts to Rs. 20,000 (Rupees Twenty Thousand Only) and annual maintenance charges of Rs. 7,000/- per acre per annum which amounts to Rs. 28,000 (Rupees Twenty Eight Thousand Only) which shall be revised from time to time by the authority and shall be payable by the company.

2. The applicant sought Advance Ruling on the following questions/issues

1. The applicant is seeking clarification on the imposition of the GST on the land premium to be payable to the RIADA.

2. What is the applicability of serial No. 41 of notification 12/2017 under heading 9972 of GST issued by the central government on the payment of upfront lease premium on future installments?

3. As per Section 97(2) of the Central Goods and Services Tax Act, 2017(herein after referred to as the 'CGST ACT, 2017) and Jharkhand Goods and Services Tax Act, 2017 empowers the Advance Ruling authority to decide the issue, which are as follows:-

    (a) classification of any goods or services or both

    (b) applicability of a notification issued under the provisions of this Act;

    (c) determination of time and value of supply of goods or services or both;

    (d) admissibility of input tax credit of tax paid or deemed to have been paid;

    (e) determination of the liability to pay tax on any goods or services or both;

    (f) whether applicant is required to be registered;

    (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

4. From the aforesaid provisions of Advance Ruling it is observed that the Applicant is eligible to seek Advance Ruling under sub-para(b) i.e, applicability of a notification issued under the provisions of this Act; and sub-para (e) i.e, determination of the liability to pay tax on any goods or services or both; of Section 97(2) of the CGST/SGST Act,2017.

5. The Applicant with regard to each questions has submitted that:-

    5.1 Serial No 41 of notification 12/2017 dated 28-06-2017 was issued under the GST Act, whereby the Central Government, on recommendation of the Council, made exemption from payment of GST on the 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 (30 years, or more) lease of industrial plots provided by State Government Industrial Corporations.

    5.2 Since the applicant as entered in to agreement with RIADA under the lease agreement for the period of 30 years for the lease of industrial plot provided by the state industrial development corporation, the upfront payment made against the land taken on Lease from RIADA is exempted from tax liability under GST, as the payment for lease is covered under Serial No 41 of notification 12/2017 dated 28.06.2017.

    5.3 The applicant further submitted that Section .7 defines scope of Supply under the CGST Act 2017, As per Section 7 of CGST Act 2017 "Lease" is covered under the Scope of supply and hence qualifies as taxable supply. However, certain kind of Lease were exempted from the above mentioned section vide Serial No 41 of notification 12/2017 under heading 9972 of GST. "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 Corporation or undertakings to industrial units, "is exempt from tax.

    5.4 As per the above mention notification issued by the central government, amount paid for lease premium is exempted from GST/ service tax if:-

      I. The lease premium is paid as upfront amount (called as premium, salami, cost price, development charges or by any other name)

      II. Lease is for 30 years or more

      III. The lessor is state Government or any industrial unit/ corporation established by it.

A similar notification, granting similar kind of exemption under service Tax Act was also issued by the central Government vide Notification No. 41/2016. The said notification is produced by the Applicant as follows:-

    "In exercise of the powers conferred by sub - section (1) of section 93 of the finance Act. 19954(32 of 1994), the central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided by state Government industrial Development Corporations/ undertaking to industrial units by way of granting long term (thirty years, or more) lease of industrial plots from so much of service tax leviable thereon under section 66 B of the said Act as is leviable on the one time upfront amount (called as premium, salami, cost price, development charges or by any other name) payable for such lease."

5.5 The Applicant is has also submitted that the lease in question, prima facie satisfies the conditions of the said notification as follows:-

    (i) Lease is for 30 Years or more

    (ii) The Lessor is State Government or any industrial unit/corporation established by it.

    Now if his case satisfies that the present Lease also satisfies the third condition, then Premium paid for the Lease shall be exempted from GST, Third condition which needs to be satisfied is:

    (iii) The Lease premium is paid as upfront amount (called as premium, salami, cost, price, development charges or by any other name)

5.6 The Applicant submission is that the term "upfront amount (called as premium, salami, cost, price, development charges or by any other name)" is nowhere defined under the GST Act or Rules. However, the applicant himself explained the word upfront as the word "upfront" is understood and used in common parlance as "beforehand" or "before the actual event is due", whereby upfront amount (called as premium, salami, cost, price, development charges or by the other name) is nothing but premium paid in advance by the lessee to the lessor.

5.7 The Applicant is making payment for the lease in first five years of the lease term which is for 30 years. Hence, premium paid for lease by the applicant qualifies as advance, beforehand or upfront payment.

6. Personal Hearing Proceedings:

The Personal hearing of the applicant's Representatives as well as the concerned Jurisdictional Officer was conducted and concluded on 02-08-2018

7.1 We have considered the submissions made by the Applicant in their application for Advance Ruling as well as the submissions made by the concerned Jurisdictional Officer during Personal Hearing. We also considered the questions/issues on which Advance Rulings have been sought for by the applicant, relevant facts having bearing on the questions/issues raised, the applicant's understanding/interpretation of law in respect of the issue.

7.2 The applicant sought Advance Ruling on the two questions i.e. -

    (i) The applicant is seeking clarification on the imposition of the GST on the land premium to be payable to the RIADA.

    (ii) What is the applicability of serial No. 41 of notification 12/2017 under heading 9972 of GST issued by the central government on the payment of upfront lease premium on future installments?

7.3 In view of the above, issues before us to decide whether the imposition of the GST on the land premium to be payable to the RIADA or not, we have studied the provisions laid down and notification issued in this regard as serial number 41 of notification 12/2017 under heading 9972 of GST. As per the above mentioned notification issued by the Central Government the amount paid for lease premium to the RIADA is exempted if and only if ,-

    I. The lease premium is paid as upfront amount

    II. Lease is for 30 years or more

    III. The lessor is state Government or any industrial unit/ corporation established by it.

7.4 In the present case (i) the lease is for 30 years, (ii) The lessor i.e. RIADA is a corporation established by the State Government but the premium paid for the lease in 10 equal instalment over a period of 5 years. After paying the first instalment as upfront the applicant has received the service i.e. the industrial land/shed for the period of 30 years from the date of allotment.

7.5 Since the applicant has admitted himself that the word upfront means "beforehand" or "before the actual evident is due", the so called premium paid in instalment after the allotment does not qualify the criteria of upfront amount.

8. In view of the foregoing, we pass the following:

ADVANCE RULING

The amount payable in instalment to the Ranchi Industrial Development Authority (RIADA) on lease in respect of the scheduled land/ shed for a period of 30 years from the date of allotment after getting the allotment letter does not come under the category of upfront payment. Hence, it is not exempted from the GST vide serial no 41 of notification 12/2017 under heading 9927 of GST.

Pradhuman Badri Prasad Meena Sri Ram Chandra Prasad Barnwal

Member Member
(Central Tax) (State Tax)