Exemption from GST on Upfront Amt Payable on Long Term Lease

To give effect to the decisions taken in the 38^th GST Council Meeting held on December 18^th, 2019; the Central Board of Indirect Taxes & Customs (“CBIC”) vide Notification No. 28/2019 – Central Tax (Rate) dated December 31, 2019 has made following changes in the Notification No. 12/2017 – Central Tax (Rate) dated June 28^th, 2017 (“Services Exemption Notification”) w.e.f January 1^st, 2020.

In the Services Exemption Notification in the Table, against serial number 41, –

1. In column (3), The figure “50” at both the places where they occur, has now been substituted by the figure “20”.

Therefore, this amendment effectively reduces the required stake of Central Govt, State Govt, Union Territory in State Government Industrial Development Corporations or Undertakings or by any other entity to 20% or more from the earlier requirement of 50% or more.

2. The additional condition to avail the exemption has now been notified by way of entry in column (5) which earlier stated the words “nil” viz.

“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.”