The Surat Textile Market Cooperative Shops & Warehouses Society Ltd, a cooperative society
in Gujarat, maintains the Sural Textile Market, catering to over 1000 shops owned by its
shareholders. Facing a lease renewal of the market premises from Surat Municipal Corporation
(SMC) for 99 years, the society seeks clarification on GST implications for the lease renewal
amount and premium. As a non-profit entity, the society lacks substantial funds and plans to
recover the payment from shop owners.
The ruling determines that the one-time premium and annual premium paid by the society to
SMC for leasing the market are taxable under GST, as a lease of land falls under the purview
of supply. The society is liable to pay GST under the Reverse Charge Mechanism (RCM) for
both the lease renewal and premium. The ruling dismisses the society’s claim of exemption
under a specific notification, emphasizing the strict interpretation of exemption clauses.
Furthermore, the ruling asserts that the collection made from shop owners for lease and
premium payment constitutes a supply, subject to GST under forward charge. However, the
question of whether the shop owners can claim Input Tax Credit (ITC) for the GST charged by
the society is not ruled upon, as the applicant lacks the standing to seek a ruling on behalf of
its members.
| SW Point of View: In a recent GST ruling, the ruling establishes that the society is liable to pay GST under the Reverse Charge Mechanism for both lease renewal and premium. It also confirms the GST applicability on the collection from shop owners. However, the issue of Input Tax Credit for the shop owners remains undetermined as the applicant lacks standing to seek a ruling on their behalf. |
