Payment made to State Govt. for Change of Description of Land from Wetland to Ordinary Land Attracts GST under RCM: AAR [Read Order]

The Kerala Authority for Advance Ruling (AAR), Thiruvananthapuram has held that the payment made to the Government of Kerala for changing the description of land from wetland to ordinary land attracts Goods and Services Tax (GST) under the Reverse Charge Mechanism (RCM).

The applicant, M/s. Manappuram Finance Limited, a Non-Banking Financial Company registered under GST, had sought clarification on whether the reverse charge liability under Notification No. 13/2017 CT (Rate) dated 28.06.2017 is applicable to the payment made by them to the government for the change of land description.

The applicant, represented by K.R. Ramankutty, CA, argued that its business primarily consists of income from gold loans, money transfer business and purchase and sale of foreign currency.

The applicant claimed to discharge its GST liability on its output services as well as the reverse charge liability as per Notification No. 13/2017 CT (Rate).

The applicant owned a wetland area in Valappad village, Thrissur District, and wanted to change its description to ordinary land for constructing an office complex, for which payment of the prescribed fee to the government under the Kerala Conservation of Paddy Land and Wetland Act, 2018 is necessary.

The AAR considered the provisions of the Central Goods and Services Tax (CGST) Act, 2017 and examined whether the payment qualified as a supply of service within the meaning of Section 7 of the CGST Act.

The Authority consisting of Sreeparvathy S.L., Additional Commissioner of Central Tax and Abraham Renn S., Additional Commissioner of State Tax concluded that the activity of permitting the change of land nature and levying fees cannot be considered an activity in relation to any function entrusted to a Panchayat under Article 243 G of the Constitution of India, as claimed by the applicant.

The AAR ruled that the activity does not fall under the category of "neither a supply of goods nor a supply of service" as per Notification No. 14/2017 CT (Rate) dated 28.06.2017 as amended.

In result, the AAR determined that the payment made by the applicant to the Government of Kerala for changing the land description attracts GST liability under RCM.

To Read the full text of the Order CLICK HERE

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