GST On Transfer Of Leasehold Land: New notices for GST on leasehold land transfers stir real estate concerns
The transfer of leasehold land in India has sparked a significant debate among industry stakeholders. Recently, the Goods & Services Tax (GST) authorities have issued notices concerning the transfer of leasehold land, leading to concerns about the tax implications of such transactions. While the tax authorities argue that these transfers constitute a service and therefore subject to an 18% GST, tax experts believe that they should be treated as a sale of land, which is traditionally exempt from GST.
The Crux of the Issue
The crux of the issue lies in whether the transfer of leasehold land should be considered a sale of land or a service. In India, industrial development corporations and other governmental bodies often transfer land parcels on a leasehold basis. Sometimes, the original lessee sells the leasehold land to a new party. The question is whether these transactions should be subjected to GST or treated as exempt.
According to the tax authorities, these transfers qualify as a service and therefore are subject to an 18% GST. This tax is in addition to the stamp duty imposed by state governments, creating an added financial burden for the parties involved in these transactions.
On the other hand, tax experts argue that the transfer of leasehold land is essentially a sale of immovable property and should not be taxed under GST. They view the transfer of leasehold interest as a sale of land, which should be outside the purview of GST. However, the tax authorities maintain that these transactions involve the transfer of leasehold rights, classifying them as a service subject to GST.
The Implications
This dispute over the tax implications of transferring leasehold land has significant implications for businesses and individuals involved in such transactions. The added GST burden could increase the overall cost of acquiring leasehold land, impacting homebuyers who may have to bear the burden of higher project costs.
A key concern raised by tax experts is the potential for dual taxation. If GST is made applicable to these transactions, there would be both stamp duty and GST levied on the same transaction, resulting in tax cascading and double taxation. This goes against the conceptual framework of GST and creates an additional financial burden for the parties involved.
Currently, some notices have been issued to recover GST dues for these transfers to ensure that the demands do not become time-barred and are within the limitation period. However, the outcome of this dispute will likely set a precedent for how similar transactions are treated under the GST regime in the future.
Moving Forward
The real estate industry and stakeholders await clarity on the tax implications of transferring leasehold land. The outcome of this dispute holds significance for both current and future transactions. The decision will not only impact the cost of acquiring leasehold land but also set a precedent for how similar transactions are treated in the future.
Meanwhile, tax experts and industry professionals are closely watching the developments of this case. Abhishek A Rastogi, the founder of Rastogi Chambers, has already filed a case in Maharashtra to test the constitutional validity of GST applicability on these transactions.
As the industry eagerly awaits a resolution on this matter, businesses and individuals involved in leasehold land transfers must stay informed about the latest developments to effectively navigate the changing tax landscape.
