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GST – Kerala AAR - Scope of Supply, Cancellation of pre-GST lease agreement, GST liability on refund of unexpired lease period – Applicant had entered into long-term lease agreements with a Government-owned autonomous society, for two parcels of land in the pre-GST regime - Whether the cancellation of the pre-GST lease agreement and the refund of the unexpired lease period would be treated as a "supply" under the provisions of Section 7 of the CGST Act, 2017, and therefore subject to GST – HELD - The cancellation of the lease agreement and the refund of the proportionate amount corresponding to the unexpired lease period shall not be treated as a "supply" under the provisions of Section 7 of the CGST Act, 2017 – The cancellation of the lease was not based on any agreement where the lessee (IIITMK) consented to or agreed to tolerate the cancellation in exchange for compensation. Instead, the cancellation was imposed by the Government under statutory provisions and pursuant to a government order - The refund received by the applicant was not contractual, but rather a return of consideration for the unutilized lease period, and therefore did not involve any supply of service under the GST law. Accordingly, the refund received by the applicant would not be subject to GST - However, the AAR clarified that any additional amount received by either party specifically under a pre-agreed arrangement for agreeing to refrain from an act, to tolerate an act or situation, or to do an act would require separate examination under the GST framework – Ordered accordingly
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