GST leviable under RCM for Premium on Lease Renewal Amount Payable to Surat Municipal Corporation: AAR [Read Order]

The Gujarat Authority for Advance Ruling (AAR) observed that GST is leviable under reverse charge mechanism (RCM) for premium on lease renewal amount payable to Surat Municipal Corporation.

Surat Textile Market, the applicant is built on 24,435 sq. mtr. of land, leased by the Surat Municipal Corporation [SMC’]. The said lease expired in the year 2018. SMC has now come up with a lease proposal to renew it for a further period of 99 years.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.

The issue on which the ruling is sought is whether they are liable to pay GST under Reverse Charge Mechanism u/s 9(3) or 9(4) for premium on lease renewal amount payable to SMC. A related question Fourth issue] that has been raised is whether circular No. 101/20/2019-GST dtd 30.4.2019 grants them exemption from payment of GST. The relevant extract of notification No. 12/2017-CT (Rate) dated 28.6.2017, amending not. No. 32/2017-CT (Rate) dated 13.10.2017 and circular dated 30.4.2019.

Lease of plot and payment of one time lease premium/salami/premium on lease renewal and annual premium paid by the applicant is a ‘supply’ and is covered under Section 7(1) of CGST Act, 2017.

A Two-Member Bench of the Authority comprising Riddhesh Raval, Member SGST and Amit Kumar Mishra, Member CGST observed that “we rule that the One-time premium/salami/premium on lease renewal and annual lease premium paid by the applicant to the AURA for leasing of Surat Textile Market is covered under supply of service in terms of Section 7(1) of CGST Act, 2017. Accordingly, the said One-time premium/salami/ premium on lease renewal and annual lease premium paid by the applicant to Surat Municipal Corporation are taxable under GST in terms of the Notification No. 11/2017-CT (Rate) dated 28.06.2017.”

To Read the full text of the Order CLICK HERE

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