The Tamil Nadu Authority for Advance Ruling (AAR) ruled on allowing easement rights as a service moreover goods and services tax (GST) at the rate of 18% should be liable.
For the easement of the right, the owner of the selective property next to which he does not own.
Chennai metro rail limited CMRL who overtakes the portion of the property of the individual person for the public purpose. MoU agreed amid the owner consists of a particular clause that reveals that the owner will be said to utilize the method excluding from the part sold to CMRL.
The method was given on a lease to the owner of age 35 years for the compensation. CMRL seeks the AAR that if the GST is levied to lease the method to give access to the owner.
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In the case stated CMRL who overtakes 2500 sq ft from the person Under the land acquisition act. 452sq ft was leased out of 2500 sq ft. to the owner which is to be used as the common access road utilized by CMRL along with the person in the context of MoU where Rs 4 crore and the lease right agree on for the use of the 452 sq ft land (easement rights) as the road will be provided to the person.
“It is clear that this right of use of the ‘pathway’ granted to the lessee for a fixed period for an amount qualifies the definition of ‘easement’ of the land owned by the applicant as per Section 4 of Indian Easement Act, 1882… it is seen that in the course of business of the applicant, i.e constructing the metro station, the applicant has given easement rights to the land measuring 452 sqft to the individual for an amount agreed, Rs 60,40,980, in the MOU which is the consideration here,”
Under CGST/TNGST Act The transaction for allowing the easement rights will satisfy the condition of article 7(1)(a) as the supply.
In the section, it includes various forms of supply that are goods and services or all like barter, exchange, license, sale, transfer, rental, lease or the disposal done or concurred to be initiated for the compensation by the individual for the context or advancement of the business; promoting the services in the context or advancement of the business.
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Under SAC 999794 and chargeable under GST at 18 % GST, it ruled The attitude to granting the easement rights for the method through CRML to the owner by the steps of shared access according to the MoU was classified.
“Easement rights, long term lease, bayana, salami and similar payments are generally perceived for being made for the purchase or use of properties. As transaction in immovable property is outside GST, invariably the general perception is to ignore the tax implications,”
“It would be prudent for all tenants and landlords to be cognizant of basic principles of GST to understand that leasing, brokerage, site development, and other allied real estate transactions are construed as supply and hence liable to GST,”
