In Re: M\/s. GGL Hotel And Resort Company Limited
GST
2019 (1) TMI 488 – AUTHORITY FOR ADVANCE RULING, WEST BENGAL – [2019] 61 G S.T.R. 302 (AAR), 2019 (21) G. S. T. L. 69 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, WEST BENGAL – AAR
Dated:- 8-1-2019
Case No 32 of 2018 32 Order No. 30\/WBAAR\/2018-19
GST
SYDNEY D'SILVA AND PARTHASARATHI DEY, MEMBER
\nApplicant's representative Sri Rip Das, FCA Sri Rahul Gupta, FCA Sri Saurav Sharma, CS
\n1. The Applicant, stated to be in the hospitality and real estate business and is contemplating a new project on a leasehold land, seeks a ruling as to whether Input Tax Credit is available for lease rent paid during pre-operative period for the leasehold land on which the resort is being constructed to be used for furtherance of business, when the same is capitalised and treated as capital expenditure. Advance Ruling is admissible on the question under Section 97(2) sub-clause (d) of the CGST\/ WBGST Acts, 2017 (hereinafter referred<\/p>\n
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Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n second year, and the same would be escalated at the rate of 5% per annum, in the subsequent years from the start of the third year over the last annual lease rent per annum. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ut tax credit shall not be available in respect of the following, namely: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n g the same principles as for an acquired asset, and it is usually the same as the cost of constructing an asset for sale. When an immovable property like a building is sold the profit is computed after deducting from the sale proceeds the cost of the property, including the land. The cost of constructing the immovable asset, therefore, includes the lease rental paid for right to use the land on which the asset is built. Being an integral part of the cost of the immovable property the lease rental paid for the service of right to use the land is a supply for construction of the said property. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tructed on the Applicant's own account and treated as fixed asset, including the lease rental paid. Whether the lease rental paid for the pre-operative period is capitalized under the head 'Leasehold Land' or 'Building Block' is of little significance in this context. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" In Re: M\/s. GGL Hotel And Resort Company LimitedGST2019 (1) TMI 488 – AUTHORITY FOR ADVANCE RULING, WEST BENGAL – [2019] 61 G S.T.R. 302 (AAR), 2019 (21) G. S. T. L. 69 (A. A. R. – GST)AUTHORITY FOR ADVANCE RULING, WEST BENGAL – AARDated:- 8-1-2019Case No 32 of 2018 32 Order No. 30\/WBAAR\/2018-19 GSTSYDNEY … Continue reading “In Re: M\/s. GGL Hotel And Resort Company Limited”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-16118","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/16118","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16118"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/16118\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16118"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16118"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16118"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nThe project is proposed to be completed within a period of two years from the foundation of the project and the lease rent paid during the pre-operative period shall be capitalized in the books of account by the Applicant.
\nThe concerned officer submits in writing that credit of tax paid on goods and services used for construction of immovable property is allowed only if such immovable property is in the nature of plant and machinery. The expression plant and machinery has been defined vide Explanation to section 17 in Chapter V of the GST Act to mean apparatus, equipment , and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services and includes such foundation and structural supports but excludes inter alia land, building, or any other civil struc<\/p>\n
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\ngoods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
\nThe expression “construction” is explained to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property
\n(c) The GST Act does not define the exact nature of the goods and services received that are deemed to relate to construction of immovable property. As a result, the meaning of construction cost is to be construed as is taken in the modern parlance. The Applicant is required to pay the lease rent to the Lessor whether or not the construction has been carried out and shall be paying the lease amount even after the completion of the construction of the immovable property for the balance peri<\/p>\n
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\nThe Applicant's argument about absence of any nexus – direct or indirect – between the lease rental and construction of the buildings for hotel etc. is incorrect. Construction of the hotel etc. is impossible unless the Applicant enjoys uninterrupted right to use the land. It is clear from the Agreement that the Applicant cannot enjoy that right if he fails to pay the lease rental. Construction of <\/p>\n
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\nIn the light of the above discussion, it is held that the lease rental paid during the pre-operative period should be treated as part of the cost of goods and services received for the purpose of constructing an immovable property (other than plant and machinery) on the Applicant's own account. Input tax credit is, therefore, not admissible on such lease rental in terms of section 17(5)(d) of the GST Act.
\nIn view of the foregoing we rule as under
\nRULING
\nInput Tax Credit is not available to the Applicant for lease rent paid during pre-operative period for the leasehold land on which the resort is being constructed on his own account to be used for furtherance of business, when the same is being capitalised and treated <\/p>\n
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