The Authority for Advance Rulings (AAR), Goa has held that the long-term lease shall be subject to Goods and services Tax (GST).
The applicant is a Government Company and is registered under the provisions of GST Act, 2O17, has executed Concession Agreement for Renovation/Development of their Anjuna property through Private Investment Mode, with Myrayash Hotels Pvt. Ltd, Mumbai on 9th December 2016, given the exclusive right, license and authority to construct, operate and maintain the project for a period of 30 years extendable by further period of 30 years totalling 60 years.
Under the agreement, the applicant has collected amount of Rs. 25,20,00,000/- from M/s Myrayash Hotels Pvt. Ltd., Mumbai as one-time upfront Concession Fees for a term of 60 years @ Rs. 42,00,000/- per annum for use of their Anjuna Property through Private Investment mode on DBFOT Basis (Design Build, Finance, Operate and Transfer).
The appellants’ version was that the one-time upfront concession fee charged by the applicant, an undertaking of Government of Goa, for lease of 60 years granted to M/s Myrayash Hotels Pvt. Ltd, Mumbai is exempted from payment of GST under Sr. No. 41 of Notification No.12/2O17-CT (Rate) 28.06.2O17. It was further contended that all the conditions for claiming exemption under this entry is satisfied and complied and hence eligible for exemption under entry 41.
The authority noted that though the consideration against service is received prior to the appointed day and the contract was made in service tax regime, it cannot be said that the supply of service is completed.
The authority observed that “It can easily be understood that the consideration is received against the services to be provided for next 60 years i.e. the supply of service is in the nature of continuous supply of service. Therefore, the same is liable to be taxed under GST Act.”
Therefore, the applicant is not entitled for the benefits of the said notification and the activity of long term lease is liable for the levy of GST, the authority said.