City Industrial and Development Corporation of Maharashtra Ltd. (CIDCO) is a special planning authority for the areas of Navi Mumbai and was incorporated on March 17, 1970 with the specific aim for creating a new planned, self-sufficient and sustainable city on the mainland across Thane Creek adjoining the Mumbai City. CIDCO then disposed of the Navi Mumbai Land by charging them a onetime lease premium. In addition to this one-time lease premium, a separate lease rental is charged annually for the period of lease. The petitioners won the bid for securing lease of such land from CIDCO in areas of Navi Mumbai and Panvel. However, the petitioners questioned the levying of GST separately on the one-time lease premium amount at the time when allotment letter was issued.
SLP has been filed before the Apex Court against the judgment of Bombay HC [TS-108-HC-2018(BOM)-NT] wherein the levy of GST on one-time lease premium charged by CIDCO from members of Builders Association of Navi Mumbai in respect of letting of plots of land was confirmed under Section 7 of CGST Act read with Schedule II.
The HC had rejected assessee’ s contention that long term lease of 60 years would tantamount to sale of immovable property, since lessor is deprived of, by allotment, the right to use, enjoy and possess the property and that one-time lease premium is different and distinct from lease ‘rent’. As per the Court, while CIDCO is designated as a New Town Development Authority for purpose of Maharashtra Regional and Town Planning Act, 1966 (MRTP Act), it is a ‘person’ u/s 2(84) of CGST Act and in the course or furtherance of its business, disposes lands by leasing them out for a consideration styled as “one-time premium”.
HC noted that as per Schedule II of CGST Act (Item No. 2), any lease, tenancy, license to occupy land and lease / letting out of a building for business is a supply of ‘service’, and accordingly remarked, “Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered.”
HC further stated that, it is entirely for the legislature to exercise powers conferred by Section 7(2) of CGST Act and issue requisite Notification sans which, merely going by the status of CIDCO, it cannot be held that lease premium would not attract / invite liability to pay GST.
Now, the SC has issued notice and given 6 weeks to the Revenue to file a reply.