The Supreme Court (SC) presided by Justice Prakash D. Naik and Justice Dharmadhikari upheld the decision of the Bombay High Court. It was ruled that one time leasehold premium charged by City Industrial and Development Corporation of Maharashtra Limited (CIDCO) is liable to Goods and Services Tax (GST).
The petitioners Builders Association of Navi Mumbai and Neelsidhi Realties challenged an order levying/collecting the GST on the one-time lease premium charged by CIDCO while letting plots of land on lease basis.
The petitioners claimed that in the normal course of business, the respondent CIDCO periodically solicits bids from different organisations to lease residential/commercial plots and three- and four-star hotel plots in Panvel and Navi Mumbai.
According to the scheme, the bidder/tenderer must submit an offer by providing a rate per square metre for the payment of the leasing premium. The plots will be given out on a 60-year long lease.
Because a base price has already been established for the plot in the annexure to the tender for the payment of the one-time lease premium amount, the tenderer is required to offer a price that is higher than the base price per square metre of the plot they are interested in acquiring.
Jetly, counsel appeared for Central Goods and Sales Tax Commissionerate and the Union of India asserted that this is a petition which seeks to pre-empt the levy assessment and recovery of GST.
Apart from that it was submitted that the law does not make any distinction between governmental and nongovernmental agencies and supply of goods or services attracts GST. The CIDCO cannot be treated as Government. Thus the provisions are clear, the tax is leviable.
The opposing counsel’s claims, according to the Respondent counsel, are based on decisions made outside of the context of the GST Act.
Therefore, it is impossible to ignore a unique and different tax law with its own goals and objectives, and according to Jetly, no definition may be automatically taken from another taxation statute.
The bench held that any lease or letting out of a building for business purposes, whether it be a commercial, industrial, or residential complex, whether in full or in part, constitutes a supply of services.
Additionally, because the substantive provisions and the Schedule treated the activity as a supply of goods or services, particularly in relation to land and buildings and including a lease, the consideration as a premium/one-time premium is a factor that determines how much tax is levied, assessed, and recovered.
The apex court sided with the Bombay High Court and believed that they had correctly concluded that the service in question was taxable and that the service tax could have been assessed and sought based on the payment made. Furthermore, CIDCO’s request for payment of the GST is legitimate.
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