Fact: M/s. The Cochin Plantations Ltd, is holding 192.88 hectares of vacant land on perpetual lease from erstwhile Cochin State, now the Kerala Government. The applicant cultivated coffee plantation in the land and paying rent or lease rent to Forest Department. It is alleged that the lease rent paid by the applicant in connection with transfer of right in goods without the transfer of title, further the department raised the demand of 18% tax.
Issue Involved: Whether quit rent / lease rent paid to Kerala Government on the land used for agricultural purpose (Coffee Plantation) be classified under HSN 9986 or HSN 9973?
Applicant’s Interpretation of law: According to the applicant, as per Section 2(52) of GST Laws goods means every kind of movable property. As land being an immovable property cannot be classified as goods and HSN 9973 will not applicable for rent on land leased for agriculture. As per HSN 9986 renting or leasing of vacant land for use relating to cultivation of plants or agricultural produce is exempted from tax.
Held: The Hon’ble AAR of Kerala vide Advance Ruling ORDER No. KER/ 11 /2018 dated October 20, 2018 held that the Sale of land doesn’t attract GST as the State imposed stamp duty and registration fee on such transaction. But the grant of lease constituted ‘supply’ for a ‘consideration’ and thereby the lease transactions are covered under the category of ‘Supply of Services’. Further the 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 as per Notification No.12/2017- Central Tax (Rate) / SRO.No.371/2017 government has exempted intra-state supply of services covered under Heading 9986. However, as per the aforesaid notification services relating to cultivation of plants or agricultural produce by way of ‘vacant land with or without a structure incidental to its use’ is exempted from tax liability. Therefore the quit rent / lease rent paid to Kerala Government on the land used for agricultural purpose i.e. Coffee Plantation be classified under HSN 9986 and eligible for exemption under GST.