The Tamil Nadu Appellate Authority of Advanced Ruling (AAAR) upheld the AAR’s ruling that 18% GST shall be levied on the Leasing of the pathway to an individual to their dwelling unit.
Here, in this case, the applicant is the “Chennai Metro Rail Limited” which took possession of the part of the property including the land that has been leased out now to the owner for the public purpose for apt reimbursement/compensation.
Under clause 4 of the agreement that has been entered into between CMRL and Dr K Prema (the lessee), Dr K Prema is empowered to utilize the passage with the 3-meter width and 14-meter length that measures 452 out of the acquired land for shared access purposes for a time period of 35 years in return for Rs 30,00,000 towards lease amount.
The applicant is seeking clarification from the authority whether the amount of Rs 30,00,000 received for the purpose of permitting right to access to the pathway that is leading to the dwelling unit is exempted from the levy of GST as per the notification 
Check out the latest FY 2020-21 GST notification on tax and rate in PDF formats such as Central, Integrated, Union Territory in English and Hindi language. Read more that treats the agreement as one for leasing out a ‘dwelling unit”. The applicant is seeking whether the advance ruling on the matter/issue of whether leasing of a pathway to a person to his dwelling unit by the applicant is taxable under GST.
However, the AAR passed the ruling that the act of giving assent to entitle easement rights related to the pathway by the applicant to Dr K Prema can be categorised under SAC 999794 and taxable as per GST at 9% CGST and 9% SGST under Sl No. 35 of the Notification 11/ 2017–Central Tax (Rate) bearing date June 28, 2017, and Notification bearing date June 29, 2017, respectively.
The appellant has challenged the AAR’s order on the basis that AAR has failed to consider and comprehend that the grant of access to pathway to make connectivity with the outside world is a covenant that runs with the land and is inseparable from the sale and purchase of land and which is not a supply to be taxed as per GST.
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The appellant further submitted that AAR has failed to comprehend that the pathway lant that was the subject of permanent access to the landlady had to be used for entry into and exit from the residential house of the Landlady and is part and parcel of the dwelling unit that is essential which is not liable to be taxed as per GST law.
The Coram of G.V.Krishna Rao and MA Siddiqui held that in the instance of renting or leasing of the property, the owner shall not have the right to utilize land or pathway involved as renting/leasing includes the transfer of the privilege to enjoy the property (asset) to the lessee and the lessor does not retain the right to enjoy the property during the lease period. Here in this case it doesn’t constitute a lease of the pathway but only rights are granted to the landowner by the appellant for the shared access.
It is noted that the grant of accessibility to the pathway is a right given by them to the landowner. This act of giving consent to granting rights for shared accessibility of the pathway is an “act of agreeing to tolerate an act and can be categorized under SAC 999794 as per “other miscellaneous services/Agreeing to tolerate an act’ and is taxable subject to 9% SGST as per SI. Number 35 of Notification11/2017 CT (Rate) bearing date June 28, 2017, as rightly held by AAR (lower authority).
