The Gujarat Authority for Advance Ruling (AAR) observed that the applicant, The Surat Textile Market Cooperative Shops & Warehouses Society Ltd, is liable to pay GST under Reverse Charge Mechanism (RCM) in terms of Section 9(3) of the CGST Act, 2017, for the lease renewal amount payable to Surat Municipal Corporation.
The applicants primarily take care of the day to day maintenance activity of the premises such as security, common lightings, common toilet, cleaning, other repairs, parking and maintenance etc. of the Surat Textile Market. Surat Textile Market, comprises of more than 1000 shops of various sizes & each shop owner is a shareholder of the applicant.
The applicant, being a non-profit association, with the primary activity as listed supra, lacks such huge funds & therefore the payment which has to be made will have to be recovered from the owners of the shops in the Surat Textile Market, who are also shareholders of the applicant.
Section 9(3) of the CGST Act, 2017 empowers the Government to issue notification, on the recommendations of the GST Council, specifying categories of supply of goods or services or both wherein tax shall be paid on RCM basis by the recipient. Section 9(4), ibid, on the other hand, empowers Government to issue a notification to specify a class of registered persons who shall in respect of supply of specified categories of goods or services or received from an unregistered supplier, pay tax on RCM basis. A Two-Member Bench of the Authority comprising Riddhesh Raval, Member SGST and Amit Kumar Mishra, Member CGST observed that “Hence, lease of land is to be treated as a supply of services chargeable to GST. In terms of Sr. No. 5 of Notification No. 13/2017-Central Tax (Rate), dated 28-6-2017, as amended, the applicant, [who as a recipient falls within the ambit of a ‘business entity’, in terms of the definition of business as per 2(17), ibid] becomes liable to discharge GST under RCM in terms of section 9(3) of the CGST Act, 2017 in respect of the services supplied by SMC, [a local authority in terms of Section 2(69).”
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