GST can’t be levied on leasehold rights of GIDC plots transferred to 3rd occasion, says Gujarat HC | Ahmedabad Information

The HC was listening to a bunch of petitions over levying GST on the leasehold rights of a 3rd occasion on plots — allotted on lease by the GIDC — on which buildings might have been constructed by the lessee or its successor (assignor) on cost of lump-sum consideration — contemplating the identical as provide of service beneath the Central/State Items and Service Tax Act, 2017 provisions.

The courtroom had most well-liked a particular civil software by the Gujarat Chamber of Commerce and Business (GCCI) as a lead matter within the case.

The GIDC, established beneath the Gujarat Industrial Improvement Act, 1962, is a nodal company of the state authorities which acquires land to develop them as industrial estates by creating infrastructure reminiscent of roads, water provide, drainage, road lights and so forth. The GIDC allots land to an industrial entity or individual on a long-term lease for 99 years.

The matter pertained to a number of firms and entities dealing with the notices in search of 18% GST to be paid on lease transfers of lands owned by the GIDC.

Chairman of the Oblique Tax Process Power at GCCI, Advocate Nayan Sheth, informed The Indian Categorical, “The GIDC provides a long run lease of 99 years to a specific trade. Beneath the GST, there’s a notification that when GIDC provides a long-term lease, no GST might be relevant. The unique deed grants energy to the lessee to switch leasehold rights after taking GIDC’s approval. In such instances, the unique lessees pay the stamp responsibility on it and thereafter, the brand new lessee turns into the direct lessee of the GIDC and the unique lessee will get out of the image. The competition of the GST was that it is a provide of service. Nevertheless, the arguments earlier than the courtroom from the petitioners was that it was a switch of immovable property”.

The courtroom noticed that whereas the petitioners submitted that the transactions of task of leasehold rights can’t be considered in scope of “provide of companies” by the GST, the respondents, represented by Advocate Normal Kamal Trivedi, drawing a distinction between “immovable property” and “curiosity in immovable property” mentioned that curiosity in immovable property can be chargeable for GST inside the scope of “provide of companies”.

The HC in its order, mentioned, “Because the assignor (authentic lessee of the GIDC) transfers leasehold rights after receiving the consideration as decided on the idea of worth of such leasehold rights, such transaction due to this fact would of an “immovable property” and can’t be thought of as “provide

of companies” as held by Hon’ble Apex Court docket (in different cited judgments)… the competition of the respondents (authorities) that… switch of leasehold rights because the curiosity in immovable property being intangible can be coated by the scope of provide of service, just isn’t tenable … and can’t be mentioned to be ‘service’ as contemplated beneath the provisions of GST Act. Furthermore, task/switch of rights can be out of

scope of provide of service”.

In the meantime, Sheth added that one of many essential arguments thought of by the courtroom was that the levying of GST on switch of leasehold rights had a cascading tax impact.

Sheth mentioned, “The federal government has not abolished stamp responsibility on switch of property even after the introduction of GST and stamp responsibility continues to be levied on immovable property. Treating this leasehold settlement with the GIDC as an immovable property switch, stamp responsibility is levied… the courtroom thought of that the proposed imposition of GST on leasehold rights results in double taxation, resulting in cascading impact, which is particularly sought to be averted by introduction of the GST regime and is unfair”.

The HC additionally declined the appliance of the state authorities to remain the operational order to permit time to attraction within the Supreme Court docket. Sheth added, “We expect the federal government to maneuver the SC in opposition to this order however not less than we’re shifting in a path to succeed in a conclusion”.