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GST: ITC can’t be availed on payment of Lease Premium Charges towards Land lease for business purpose: AAR

AAR - GST - ITC - Lease Premium Charges - land lease - Taxscan

The Telangana Authority of Advance Ruling (AAR) held that the applicant, M/s. Daicel Chiral Technologies (India) Private Limited is not eligible to avail Input Tax Credit(ITC) on payment of one time Lease Premium Charges towards land lease for business purposes.

The Applicant, M/s. Daicel Chiral Technologies (India) Private Limited is engaged in providing Pharmaceutical Research and Development services. These services involve preparative separation and analysis of pharmaceutical compounds which are commonly referred to as ‘chromatography services’. They classified chromatography services under the head ‘technical Testing and Analysis Services’ (SAC No. 998346) which are liable to 18% GST.

In order to render such services, the applicant requires a lab where such separation and analysis services can be performed. Currently, the applicant is rendering such chromatography services from their premises. The applicant had to acquire a new premise on lease to cater to the growing demand for services.

The applicant has sought advance ruling on the 3 main issues.

Firstly, whether the applicant is eligible to avail input tax credit of GST paid on payment of “lease premium charges (one-time charges)” towards land lease for business purpose.

Secondly, whether the applicant is eligible to avail input tax credit of GST paid on “annual lease rentals” (recurring) towards supply of land on lease for business purpose.

Lastly, whether the applicant is eligible to avail input tax credit of GST paid on “maintenance charges” collected by the lessor.

The Authority consists of the Additional Commissioner of State Tax, J. Laxminarayana, and the Joint Commissioner of Central Tax, B. Raghukiran ruled that the applicant is not eligible to avail input tax credit of GST paid on payment of Lease Premium Charges (one-time charges) towards land lease.

The Authority further ruled that the applicant is neither eligible to avail input tax credit of GST paid on annual Lease rentals (recurring) towards the supply of land on lease nor on maintenance charges collected by the lessor.

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