Amendment has been made in entry no 41 of Notification no. 12/2017- CT(R) Exemption list vide Notification No. 28/2019 –CT(R) dated 31.12.2019. 1. Old Entry no. 41 read as, “Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50%or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area.
Now, the effect of amendment is that ownership of CG, SG, UT has been reduced to 20%.
2. Also, a condition has been inserted in Entry 41. This condition reads as under:
Provided that the leased plots shall be used for the purpose for which they are allotted, that is, for industrial or financial activity in an industrial or financial business area.
Provided further that the State Government concerned shall monitor and enforce the above condition as per the order issued by the State Government in this regard.
Provided also that in case of any violation or subsequent change of land use, due to any reason whatsoever, the original lessor, original lessee as well as any subsequent lessee or buyer or owner shall be jointly and severally liable to pay such amount of central tax, as would have been payable on the upfront amount charged for the long term lease of the plots but for the exemption contained herein, along with the applicable interest and penalty.
Provided also that the lease agreement entered into by the original lessor with the original lessee or subsequent lessee, or sub- lessee, as well as any subsequent lease or sale agreements, for lease or sale of such plots to subsequent lessees or buyers or owners shall incorporate in the terms and conditions, the fact that the central tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements undertake to comply with the same.”
Analysis of condition:
1. Exemption from payment of GST on upfront amount will be granted only when plots are used for the purpose for which they are allotted i.e. for industrial/financial activity in industrial/ financial business area.
2. In case of violation of this condition due to any reason; lessor, lessee and buyer (whether original or subsequent) will have to pay CGST along with interest and penalty.
3. Also, it should be stated in the agreement that such exemption has been granted subject to certain conditions and that parties have agreed to such conditions.
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