GST Case 7- M/s. Cochin Plantations Ltd

GST Case 7- Cochin Plantations Ltd

In GST case of M/s. Cochin Plantation Ltd. The applicant has raised the question regarding the quit rent/lease rent paid to the government for agricultural produce.

Query:

Whether quit rent/lease rent paid to Kerala Government on the land used for the agricultural purpose (Coffee Plantation) be classified under HSN 9986 or HSN 9973.

Facts:

Vacant land was given by erstwhile Cochin State to the applicant for cultivation on lease rent. Accordingly, the petitioner converted the vacant land to Coffee Plantation. The applicant was paying quit rent or lease rent to Government through Forest Department.

Observation:

AAR observed that grant of lease constituted ‘supply’ for a ‘consideration’ and thereby the lease transactions covered under the category of ‘Supply of Services’. Quit-rent is a tax or land tax imposed by Government on occupants of freehold or leased land in lieu of services to a higher landowning authority. In the instant case, vacant land given by erstwhile Cochin State to the applicant for cultivation on lease rent was converted by the petitioner to Coffee Plantation.

Held:

AAR held that quit rent/lease rent paid to Kerala Government on the land used for agricultural purpose i.e. Coffee Plantation is exempted from GST vide Heading 9986 of Notification No.12/2017-CT (Rate)/ SRO.No.371/2017 N. No.12/2017 under services relating to cultivation of plants or agricultural produce by way of ‘vacant land with or without a structure incidental to its use’.

Comments:

It has been a bone of contention that whether the lease of land is the supply of service or not. AAR Kerala although did not specifically discuss the issue but started with the notion that lease of land is a service. However, held it exempted under another entry in N. No. 12/2017. Hon’ble Bombay High Court in the matter of Builders Association of Navi Mumbai v. Union of India (Bombay) Dated-March 28, 2018 has upheld levy of GST on the lease of land.