2025-VIL-171-AAR
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SGST Advance Ruling Authority

GST – Andhra Pradesh AAR - Transfer of leasehold rights, Scope of Supply, Application of Hon’ble Gujarat High Court order in Gujarat Chamber of Commerce and Industry case, Eligibility to input tax credit – Applicant had taken land on 99-year lease to set up a manufacturing unit. The applicant now proposes to transfer the remaining 89-year leasehold rights over this land to another entity for a consideration - Whether the assignment of leasehold rights of the leasehold land is covered under the scope of supply for levy of GST under Section 7 of the CGST Act, 2017 - HELD – Under the GST law, the assignment or transfer of leasehold rights is generally treated as a supply of service, and not a sale of land. Schedule II of the CGST Act specifically classifies the grant of the right to use immovable property for consideration as a supply of services - Though the Hon’ble Gujarat High Court has held that the assignment of leasehold rights in land allotted by the GIDC constitutes a transfer of immovable property and is outside the purview of GST, this view may not align with the statutory framework and intent of the GST regime. The aforesaid judgment has been assailed before the Hon’ble Supreme Court of India and presently pending adjudication – The Assignment of Leasehold rights do not amount to ownership; they merely provide the transferee with the right to use the property for a defined period under specified conditions. Therefore, equating such assignments with the outright sale of land, which is excluded from GST under Entry 5 of Schedule III, may be a misapplication of the law - The assignment of leasehold rights is covered under the scope of supply under 7 of the CGST Act, 2017 and hence GST is applicable on the consideration of Transfer of Leasehold land paid by Transferee to Transferor-applicant – Ordered accordingly - Whether the recovery of cost of land development and related expenses is considered a supply of service liable to GST under the relevant provisions - HELD – The activities involving land development, levelling, laying of drainage, or any civil works undertaken by applicant and reimbursed by Transferee qualify as a taxable supply of service and attract GST at the appropriate rate - Furthermore, CBIC Circular No. 177/09/2022-GST dated 03.08.2022 clarifies that activities involving land development, levelling, laying of drainage, or any civil works are taxable services under GST. Hence, the related civil development work undertaken by the applicant and reimbursed by the transferee qualifies as a taxable supply of service and attracts GST at the appropriate rate - Whether applicant is entitled to input tax credit of GST paid on the commission to be paid to Sri City for the transfer of leasehold land - HELD - The transfer fee charged by Sri City Private Limited is in the nature of consideration for tolerating an act that applicant is otherwise restrained from doing as per the lease deed. This is classifiable as an 'Other miscellaneous service' and is taxable under GST at 18%. It is the consideration payable to the lessor for providing a service in the course or furtherance of business, more specifically because business includes supply or acquisition of goods or services in connection with the business in terms of Section 2(17)(d) of the GST Act. The GST to be paid on such transfer fee is, therefore, admissible as input tax credit under Section 16 of the CGST Act.
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