Businessmen who have sold plots in the industrial estates of MIDC may soon receive a visit from the taxman. For these transactions, the central GST department is now collecting an 18% charge.
The transactions are treated as leases, which are subject to GST because they are considered services. Since the introduction of the GST in 2017, all such transfers have been subject to tax demand.
Tax advisors have questioned the department’s passivity during the previous five years and its sudden awakening on the issue out of concern that it would cause a stir among enterprises.
Since July 2017, the directorate of GST intelligence (DGGSTI), which fights duty evasion, has been gathering information on these transfers.
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Through the original allotment by MIDC, there is no GST. But when the individual allottees lease the land to others, the same shall be levied to tax.
DGGSTI stated to MIDC specified that when the same is in the verification process of the cases of plot transfers since July for confirming if the transferor would have filed for the taxes or not.
The Chamber of Small Industries Associations (COSIA) would arrive at the defence of plot holders. “The Central GST Department has already begun issuing notices demanding tax on the total value of the land. This means that if the plot was transferred for Rs 1 crore to the third party then GST would be Rs 18 lakh,” Julfesh Shah, chairman of COSIA in Vidarbha stated.
On January 25, COSIA would have conducted a meeting of different industrial associations. MIDC estates of Nagpur and the rest of the state shall get impacted largely, Shah stated. Thousands of such units may have not paid GST considering that exemption as per notification on 28th July 2017 is available.
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Shah contended that these transfers must not be acknowledged as leases but as sales. Also, MIDC treated the same as the sale for practical purposes as of the long-term tenure of the lease because of which the stamp duty would be filed. When a plot is sold, transfer fees are paid, which is similar to capital profits. Additionally, he added, no input tax credit is possible in this scenario if GST is imposed.
According to sources, it is fairly uncommon for businesses to hold control of plots and then sell them for a profit. The transfer fees are based on the difference between the MIDC’s new and old rates. However, plots are sold for a much higher cost.
