Transfer of Land held under Lease is a Supply and Liable to GST: AAR [Read Order]

The Maharashtra Authority for Advance Ruling ( AAR ) has held that the transfer of land held under lease is a supply and liable to GST.

The applicant Forest Development Corporation Of Maharashtra Limited (FDCM Ltd) is Maharashtra State Government undertaking, primarily engaged in plantation and harvesting of trees, predominantly Teak. Land was given to FDCM under lease by Maharashtra State Forest and Revenue Department and FDCM Ltd does not own the land. The leased land is now being diverted towards a minor irrigation project under the Maharashtra State Irrigation Department. FDCM Ltd is being compensated by the user agency and a No Objection Certificate will be issued for usage of land subject to payment of compensation determined by FDCM Ltd on the date of transfer.

A ruling is sought on whether the transfer of land held under lease by FDCM Ltd for the Kolsapada Minor Irrigation Project under the Irrigation Department of Maharashtra is a supply of service. The Coram Sri Rajiv Magoo, Member Central Tax and Sri T.R. Ramnani, Member State Tax held that “As per 5 (e) of Schedule II of the CGST Act 2017, agreeing to the obligation to do an act amounts to supply of services. In the subject case, the applicant has agreed to do an act i.e. the applicant has agreed to relinquish its lease right on the said land in favour of Irrigation Department on the directions of the owner of the land i.e. MSFR Department. Thus the said action of the applicant is nothing but supply of services under the GST Laws and the said supply is to MSFR department for which compensation is received from the Irrigation department”.

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