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Leasing services provided by Indian Railways for land development attracts 18% GST

  • | Divita S Gupta

Leasing services provided by Indian Railways for land development attracts 18% GST

The Rajasthan bench of the Authority for Advance Ruling has held that leasing services provided under a lease agreement entered into for a period of 99 years between the Rail Land development Authority (RLDA) and a special purpose vehicle for residential and commercial development is not exempted from GST. The applicant, a property development company had submitted a bid for a plot at Rs 15.98 crore lease premium and another plot at Rs 31.90 crore lease premium. The applicant entered into a lease agreement with RLDA for 99 years for a land measuring 7337 hectare for residential development and paid an amount of 15.8 crore as the first installment of lease premium in February 2019. The applicant had also paid an amount as a security deposit before entering into the lease agreement. The applicant sought an advance ruling contending that the amount paid as a security deposit was fully refundable and hence should not attract GST. The Rajasthan AAR however rejected the contention and ruled that GST is applicable under reverse charge mechanism. It also held that the RLDA is a statutory government authority that is into the business of leasing land which is for commercial function and that the said service attracts a GST at the rate of 18%.


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Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.

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