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THE JHARKHAND GOODS AND SERVICES TAX ACT, 2017. Advance Ruling
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Body Advance Ruling Order No. AAR/JHR/2021-22/07, Dated 03rd January, 2022

JHARKHAND AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

(Constituted under section 96 of the Jharkhand Goods and Services Act, 2017)

Divisional Office of State Tax, Civil Court Compound

Near Jaipal Singh Stadium, Ranchi-834001, Jharkhand

BENCH

1. Shri M V Badri Prasad

Additional Commissioner, CGST & CX. Ranchi............................ Member (Central)

2. Shri Pradeep Kumar

Joint Commissioner of Commercial Taxes .............................. Member (State)

PREAMBLE

The provisions of both the Central Goods and Service Tax Act and the Jharkhand Goods and Service Tax Act (hereinafter collectively called 'the GST Act') are the same except for certain provisions. Therefore, unless a mention to such dissimilar provisions is specifically made, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Jharkhand Goods and Service Tax Act.

A person within the ambit of Section 100(1) of the Central Goods and Services Act, 2017, if aggrieved by this Ruling, may appeal against it before the Jharkhand Appellate Authority for Advance Ruling, constituted under Section 99 of the Jharkhand Goods and Services Act, 2017, within a period of thirty days from the date of communication of this Ruling, or within such further time as mentioned in the proviso to Section 100 (2) of the GST Act.

This Ruling is valid, subject to the provisions under Section 103 of the GST Act, until and unless declared void under Section 104(1) of the GST Act.

1.

Name & Address of the applicant Ranchi Smart City Corporation Limited

2.

GSTIN or User ID 20AAICR3723L1ZG

3.

Date of filing of Form GST ARA-01

30.09.2021

4.

Represented by CA Ranjit K Gadodia

Brief Facts:

The applicant have submitted that they are engaged in the allotment of land (Plots) on Leasehold (99 Years)/ Freehold (Residential) basis to eligible bidders through e-auction process for institutional, Residential. Commercial, Public & Semi Public and Mix use as per terms and conditions specified in Jharkhand Smart Cities Land and Other Fixed Assets (Utilization. Allotment and Disposal) Rules, 2019, as amended. The Leasehold is either one time transfer for 99 years on lease or on Annual Lease Rent. The Freehold basis is Freehold sale, i.e., Transfer of ownership.

2. The applicant have further submitted that Ranchi Smart City Corporation Limited (((RSCCL) was established in the Year 2016 under Smart City Mission, a scheme sponsored by the Government of India, with focus mainly on excellence in education in ABD Location of 656.30 Acres along with provision of basic amenities like drinking water, sanitation, and solid waste management in a much smarter way to address the challenges of urban infrastructure issues posed by Ranchi's rapidly growing urban population. This 656.30 Acres of land which is a Greenfield Based development will adopt a transit-oriented development (TOD) approach with dense, mixed-use neighborhoods planned along frequent, fast and reliable high capacity mass transport lines. The applicant have purchased 647.08 Acres of land in capital city of Jharkhand from Heavy Engineering Corporation Ltd. (HEC) and has framed the rules and regulations for plot-wise allotment of purchased land for development of the area and to transform it into a sustainable, equitable and inclusive smart city.

3. The applicant have sought for Advance Ruling in respect of the following questions:-

    (i) Applicability of GST on transfer of Leasehold land which includes other services such as Electricity Line, Water Line, Drainage Line, Road, Sewerage Line etc. like in case of plotted development.

    (ii) Applicability of GST on transfer of ownership of Freehold land which includes other services such as Electricity Line, Water Line, Drainage Line, Road, Sewerage Line etc. like in case of plotted development.

    (iii) Applicability of GST on Annual Lease Rent

    (iv) Applicability of GST Rate on the above cases

    (v) Whether they as a service provider can claim ITC on their inward goods and services.

Discussion and Findings:

4. We have considered the submissions made by the appellant in their application for Advance Ruling, alongwith their supporting documents/ writings/ additional submission by their authorized representative, Shri Ranjit Gadodia, CA.

5. We find that the Government of Jharkhand, in association with the Government of India, decided to engage in development of Ranchi under the Smart Cities Mission, a scheme sponsored by the Government of India for promoting substantial urban development, utilizing information services and technology to achieve its objective. Accordingly, the Government of Jharkhand constituted a Special Purpose Vehicle, namely Ranchi Smart City Corporation Limited (RSCCL) for implementing the projects and other initiatives stipulated under the mission. The main objective of RSCCL is Area Based Development of 647.30 Acres of land purchased from Heavy Engineering Corporation Ltd. (HEC), by way of demarcation of plots, roads, parks, playground, amenities and other utilities as per Jharkhand Smart Cities Land and Other Fixed Assets (Utilization, Allotment and Disposal) Rules, 2019 apart from some basic facilities.

6. The Smart City Mission is a Government of India project and RSCCL is just a special process vehicle of Jharkhand Government for implementing it in Ranchi. The Government of Jharkhand has vide Resolution SUDA/SCM/SPV-RSCCL-13/2016-4552 dated 17.08.2016 assigned powers vested with Ranchi Municipal Corporation to RSCCL with regards to discharging the obligation towards implementing of projects and other initiatives set forth under the mission. The RSCCL is 100% owned by the Government of Jharkhand and its ex-officio Director is the Principal Secretary, Department of Planning and Finance, Govt, of Jharkhand. Its ex-officio Chairman-cum-Managing Director is Secretary, Urban Development & Housing Department, Govt, of Jharkhand. As per Para 2(zfa) of the Notification No. 12/2017-CT (Rate), dated. 28.06.2017, "Government Entity" means an authority or a board or any other body including a society,-

    (i) Set up by an Act of Parliament or a State Legislature, or

    (ii) Established by any Government,

    With 90% or more participants by way of equity or control, to carry out any function entrusted by the Central Government, State Government, Union Territory or a Local Authority.

Hence, there is no doubt that RSCCL falls within the purview of "Government Entity".

7. Now, before going into the questions raised by the applicant, it is pertinent to discuss the taxability of land under GST Laws.

7.1 ''Supply" is defined under section 7 of the GST Law:. Section 7(1) contains an inclusive list of what constitutes a supply, while section 7(2) has listed out what does not constitute supply. Further, section 7(2) begins with a non obstante clause, thus overriding the provisions of section 7(1). Hence, except the activities listed in Schedule III and those notified in terms of section 7(2)(b), all other activities amount to supply.

7.2 "Sale of land" is covered under Schedule III of CGST Act, 2017 and is excluded from GST levy on account of being neither supply of services nor supply of goods. Serial No. 5 to the Schedule III of CGST Act is as under:-

    "5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. "

8. The basic question in the instant case is whether the sale of plot after carrying out certain development activities or providing different amenities is sale of land or supply of something other than land.

8.1 The term "Land" has not been defined under the GST Law and therefore, in absence of any definition in a statute, the meaning has to be construed in most relevant and popular sense. Land is generally qualified by its use or nature like agricultural, urban, rural, industrial, commercial, residential etc but in all cases it remains land. The end result of any activity of development of land does not change it from being land. In general trade parlance, developed land is nothing but a land and is also known as a land.

8.2 The applicant have submitted that the land in which the smart city is being developed was purchased out of funds given as secured loan by the Government of Jharkhand. Further, the development of smart city is being carried out by funds given by Government of India and Government of Jharkhand. The applicant have submitted the sanction/ release order of project fund to Jharkhand Government by the Ministry of urban Development, Government of India for development of Ranchi as Smart City. The Government of India also released fund to State Government for Administrative & Office Expenses (A & OE) separately for Smart City Proposal.

8.3 The applicant have further submitted that basic price of land is based on the factors duly approved by the Cabinet of Ministers of Jharkhand. The draft sale deed/ lease deed to be executed with the buyers/ allottees, duly vetted by their Legal Department, shows that the buyers are paying sale price of the land and no extra amount is being charged by RSCCL. RSCCL is delivering the actual, physical and vacant possession of the property to the buyer with all original documents.

8.4 We find that the development work done by the applicant is for whole parcel of land under Area Based Development and not for a given plot which is being sold to the buyer. RSCCL have been assigned with powers vested with Ranchi Municipal Corporation and the Area Based development of 647.30 Acres land under Smart City Mission is being done by RSCCL under the capacity and powers vested with Ranchi Municipal Corporation, assigned to them by Government of Jharkhand. The Central Government and Jharkhand Government have provided grants to RSCCL for Area Based Development of land. The title in the common area and amenities does not belong to the buyer but rests with RSCCL, a Government body. Further, as per the proposed sale/ lease deed, submitted by the applicant, the buyer/ lessee shall obtain water, drainage and power connection by making application to the respective authorities. The buyer shall be responsible for construction and maintenance of any road or drainage or any electric installation within the allotted plot at his own cost and expenses.

8.5 From the above, it appears that the activity of the appellant is absolute sale/ lease of land. The RSCCL are realizing only the price of land/ lease amount from the buyer/ lessee and the development cost of 647.30 Acres of land is borne by the Government. The development of individual plots by way of obtaining water/ drainage/ power connection or construction and maintenance of any road or electric installation etc. is the responsibility of the buyer. The sale of land is neither supply of goods nor supply of service as per Serial No. 5 to the Schedule III of CGST Act. Hence, we find that the applicant are not liable to pay tax on the amount received by them against allotment of land on free hold basis for the entire consideration amount of sale deed/ e-auction bidding amount.

9. ''Leasing of land" has been treated as supply of service as per Schedule II of the CGST Act, 2017. As per entry 2(a) of the Schedule-II,-

    "(a) any lease, tenancy, easement, licence to occupy land is a supply of services. "

Leasing services involving residential property is covered under SAC 997211 and Leasing services involving non-residential property is covered under SAC 997212. The applicable rate of Goods & Services Tax in both the cases is 18%. However, the entry at SI. No. 41 of Notification No. 12/2017-Central Tax (R) dated 28.06.2017, i.e., "Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in r/o service 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, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20% per cent or more ownership of Central, State Government, Union Territory to the industrial units or the developers in any industrial or financial business area" has been exempted from tax and it has been further clarified vide the Board's Circular No. 101/20/2019 - GST dated 30.04.2019, that GST exemption on the upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for long term lease (of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business under Entry No. 41 of Exemption Notification 12/2017 - Central Tax ® dated 28.06.2017 is admissible irrespective of whether such upfront amount is payable or paid in one or more installments, provided the amount is determined upfront.

Financial Business Area in not been defined in the statute. However, in common parlance, Financial Business Area or Financial District or Central Business District is often the commercial and business centre of a city, having a number of financial firms. The Government of Jharkhand, in association with Government of India, is developing Smart City with the concept of having Industrial Zones, Commercial Zones, Residential Zones, Public/ Semi-public Zones and Mixed Use Zones. The applicant have submitted that various financial firms like Banks, Insurance Companies, Trading Houses etc. are investing for the purpose of having their branch offices there. As such, the Area Based Developed property of 647.30 Acres appears to be a Financial Business Area. Hence, the leasing of industrial plots or plots for development of infrastructure for financial business by RSCCL, a Government entity, to the industrial units or the developers in this Area Based Developed property for commercial/ mixed use is exempted from the tax. In cases other than that, the applicable rate of Goods & Services Tax in case of leasing services is 18%.

10. In light of the foregoing, we rule as under:-

RULING

Q.1: Applicability of GST on transfer of leasehold land which includes other services such as Electricity Line. Water Line. Drainage Line. Road. Sewerage Line etc. like in case of plotted development.

Ans: As discussed in forging paras, the leasing of property by RSCCL, if covered under the provisions of Notification No. 12/2017-Central Tax (R) dated 28.06.2017, is exempted from the tax. In other cases, the leasing of property by RSCCL is taxable supply of service.

Q.2: Applicability of GST on transfer of ownership of Freehold land which includes other services such as Electricity Line, Water Line, Drainage Line, Road, Sewerage Line etc. like in case of plotted development.

Ans: As discussed in forging paras, the activity of the applicant appears absolute sale of land. Hence, the consideration received by RSCCL against transfer of ownership of Freehold land, i.e., sale of land is not taxable.

Q.3: Applicability of GST on Annual Lease Rent

Ans: Leasing of land for commercial purpose is a taxable supply of service as per SI No.2(a) of Schedule II of CGST Act,2017 and attracts GST @ 18%.

Q.4: Applicability of GST Rate on the above cases

Ans: The amount received by the applicant against transfer of ownership of freehold land. i.e . sale of land is not taxable under GST Act. the amount received by the applicant against transfer of leasehold land is taxable under Leasing services and attracts GST @ 18%. if the activity not covered under the provisions of Notification No. 12/2017-Central Tax (R) dated 28.06.2017.

Q.5: Whether they as a service provider con claim ITC on their inward goods and services.

Ans: No. The applicant as a service provider cannot claim ITC on their inward goods or services.

Pradhuman Badri Prasad Meena Ram Chandra Prasad Barnwal

Member Member
(Central Tax) (State Tax)