The Tamil Nadu Authority of Advance Ruling (AAR) ruled that 18% GST payable on transfer of leasehold rights.
The applicant, India Pistons Limited has stated that they are engaged in manufacturing of goods and was allotted land measuring to an extent of 15.34 acres by the State Industrial Promotion Corporation of Tamilnadu (SIPCOT). SIPCOT had allotted land measuring 19.04 acres. Thereafter SIPCOT had further allotted land measuring 1.30 acres. Subsequent to the above allotment, there were certain lands allotted to them and remained un-utilized.
In view of Covid-19 pandemic, the Government of Tamilnadu entered into a MOU with M/s. INOX Air Products Private Limited for setting up a state of the art Ultra High Purity Cryogenic Liquid Medical and Industrial Oxygen Plant. INOX had approached them for transfer of the un-utilized portion of the allocated land by SIPCOT and they, vide MOU dated 20.11.2020 had transferred the leasehold rights in respect of the un-utilized portion of land subject to approval by SIPCOT. As per this MOU, they agreed to transfer the property admeasuring 5 acres to INOX for Rs. 15 Crores for the leasehold rights and Rs. 24 lakhs for superstructures. Subsequently, SIPCOT accorded approval for the transfer of balance period of lease hold rights measuring 5.00 acres of land along with existing shed/super structures, out of 15.34 acres at SIPCOT Industrial Complex, Hosur Phase-II from them to INOX.
The applicant has sought the advance ruling on the issue whether GST is payable on the transfer of leasehold rights in respect of the consideration of Rs. 15 Crores received by them from M/s. INOX Air products Private Limited for the land allotted by SIPCOT and whether the Subsequent transfer of SIPCOTs allotted land from the Applicant to M/s. Inox Air Products Private Limited would fall within the ambit of `Supply’ as defined under Section 7 of the Goods and Services Act 2017.
The coram of members T.Padmavathi and B.Senthilvelan noted that the activity undertaken by IPL in agreeing to part with the interests of the leasehold rights in the land required by INOX for furtherance of their business, against a consideration is an activity of ‘agreeing to do an act’, which is a taxable service classifiable under ‘Other Miscellaneous Services’, with SAC 9997.
“The activity of agreeing to partwith the leasehold interests held by the applicant in favour of M/s. INOX Air Products Private Limited is ‘Supply’ as defined under Section 7 of the Goods and Services Act 2017 and GST is liable to be paid on the consideration of Rs. 15 Crores received by them,” the AAR ruled.
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