Premium Amount Paid For Over 30 Years Lease Of Hospital, Exempt From GST: Allahabad High Court

Premium Amount Paid For Over 30 Years Lease Of Hospital, Exempt From GST: Allahabad High Court

Directs Yamuna Expressway Authority to refund the amount deposited by the petitioner pursuant to the impugned demand

The Allahabad High Court has held that premium for plots allocated for hospitals under lease extending up to 30 years or more falls under the definition of ‘amount paid upfront’ and is exempt from Goods and Service Tax (GST).

The bench comprising Justice Saumitra Dayal Singh and Justice Vinod Diwakar, while quashing the demand letter by Yamuna Expressway Industrial Development Authority (YEIDA) issued to the petitioner, observed that YEIDA failed to show which conditions of the exemption notifications were not fulfilled by the petitioner.

The petitioner had challenged the letter issued by the YEIDA advisor, demanding that he deposit the GST at the rate of 18 percent on the Rs.3.80 crores premium charged by YEIDA against Institutional Plot H-02, Sector 22-A, measuring 4,000 sq mts, allotted to him.

The petitioner argued that the exemption granted by the Central Government under Section 11 of the Goods and Services Tax Act, 2017 vide Notification No.12/2017 of 28 June 2017 read with Notification No.32/2017 of 13 October 2017, was applicable to the petitioner.

He further contended that no tax demand was raised by the revenue authorities either on YEIDA or the petitioner, as YEIDA had applied before the Authority for Advance Ruling (AAR). Since the order was never challenged by the revenue department, it attained finality.

The petitioner added that YEIDA, being within the meaning of Article 12 of the Constitution of India, was obligated to act fairly and reasonably. The demand letter was wholly illegal, as there was no mandate for GST demand on the premium paid by him to YEIDA for the allotment of a plot to set up a hospital.

On the other hand, the Revenue/State Department submitted that it did not raise any tax demand in the case. Further, the applicability of exemption notifications was not contended for revenue. YEIDA alleged that since the petitioner failed to fulflil the conditions, he was not entitled to exemption notifications.

Justice Singh and Justice Diwakar observed that since the allotment was made in 2015, the GST provisions were applicable only on the installments paid on or after 01 July 2017. The Central Government, through the notifications, granted specific exemptions to amounts paid upfront regarding the grant of a long-term lease of 30 years or more of industrial plots by development corporations/undertakings.

Thus, the bench held that though YEIDA accepted the lease for 30 years or more, it disputed the exemption notifications application. Such dispute concerned the AAR’s order (which on a query made by YEIDA), had ruled that “GST is not applicable i.e. exempted on the upfront amount if the conditions are satisfied as mentioned in Sl. No.41 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.32/2017-Central Tax (Rate) dated 13.10.2017.”

The bench stressed that once the premium charged by YEIDA fell under the ‘upfront amount’ definition under the exemption notifications, there was no occasion for it to issue the demand order.

The court stated, “The exemption notification though does contain Column No.5 to specify the condition for grant of exemption against Entry No.41, there never existed any specification or condition for grant of exemption. In fact, the original Notification No.12/2017 of 28 June 2017 mentions the word ‘Nil’ against Column No.5, against Entry No.41.”

Thus, the court clarified that the legislature consciously made the decision to grant unconditional exemption for payment of upfront amounts.

It said, “While amending that vide Notification No.32/2017 of 13 October 2017, though other changes were made by way of an activity for which allotment of plots were exempted from tax and certain Corporations were also included wherein ownership of the Central Government or the State Government may exceed 50 percent, no amendment was made to the original Notification to introduce any condition for the grant of that exemption.”

Therefore, while allowing the writ petition, it directed YEIDA to refund the amount deposited by the petitioner pursuant to the impugned demand.