GST on Preferential location charges on long-term lease of land- CBIC Clarification
The CBIC received representations from the stakeholders to clarify the question “whether location charges or preferential location charges (PLC) collected in addition to the lease premium for the long-term lease of land constitute part of the lease premium or upfront amount charged for long-term lease of land and are eligible for the same tax treatment".
In response to the same, the CBIC vide Circular No. 177/09/2022 dated 3rd August 2022 clarifies as follows:
- As per Entry 41 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 upfront amount, which is defined as “upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease (of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20 percent or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area”, is exempt from GST.
- Allowing the choice of location of the plot is an integral part of the supply of long-term lease of plot and therefore, location charge is nothing but part of consideration charged for long term lease of plot. Being charged upfront along with the upfront amount for the lease, the same is exempt.
- Accordingly, as per the recommendation of the GST Council, it is clarified that location charges or preferential location charges (PLC) paid upfront in addition to the lease premium for the long-term lease of land constitute part of the upfront amount charged for long-term lease of land and are eligible for the same tax treatment, and thus eligible for exemption under Sl. No. 41 of notification no. 12/2017- Central Tax (Rate) dated 28.06.2017.
