Industry Association COSIA asks govt to review GST levy on land lease transactions

Ease of Doing Business for MSMEs: Under GST, the initial lease of land from MIDC to the industry is exempt, but there was no specific exemption granted for further assignment of leasehold rights. This amount would come across as a huge expense for the MSMEs and could break their back.

Written by MSME Desk

February 10, 2023 23:06 IST

MSME, SME, small business, COSIA, Industry Association, GST, lease, leased land, MIDC, Maharashtra Industrial Development Corporation, GST departments, Sandeep Parekh, Chamber of Small Industries Association, supply of service, transaction, GST exemption, Devendra Fadnavis, Industry Association, CGST

COSIA along with other associations in the country are taking up the case with the respective state governments and the central government.

Ease of Doing Business for MSMEs: The small industry body, Chamber of Small Industries Association (COSIA) has appealed to the central government to review the issue of Goods and Services Tax (GST) on leased land affecting MSMEs across the country, reported PTI on Thursday.

COSIA president Sandeep Parekh in an official release wrote that the GST department has put the industry in a state of fear by sending summons and starting an investigation on the transfers of leased lands in the MIDC (Maharashtra Industrial Development Corporation) area since July 2017.

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The report said that the GST department seems to be taking action after almost five years that the transfer of leased land from one party to the other comes under the purview of supply of service and hence 18 per cent is leviable on the transaction, though MIDC is exempt, the report said.

If this continues, then it will gravely impact the MSMEs across the country who have sold their plots post July 2017 and also all future sales as well.

To highlight the issue, COSIA represented their concern in front of the finance minister Nirmala Sitharaman and the government’s GST council. The industry association has also made an appeal to the Maharashtra Deputy Chief Minister and Finance Minister Devendra Fadnavis to take up the issue with the GST council.

Under GST, the initial lease of land from MIDC to the industry is exempt, but there was no specific exemption granted for further assignment of leasehold rights. This amount would come across as a huge expense for the MSMEs and could break their back, it added.

Thousands of units in Maharashtra have not paid GST on the assignment of leasehold rights of such land taken on lease from MIDC based on the understanding that “assignment of leasehold rights in land” is akin to “sale of land” and such transactions fall under Schedule III of the CGST Act on which GST is not payable, it said.

The report further added that the units have paid stamp duty as per the sale of land, and also paid the income tax on short-term and long-term gains considering it as deemed ownership and the premium is paid to MIDC for transferring the lease.

In the times of pandemic, many MSME have suffered big losses and some had to shut down and sell their plots to settle their liabilities.

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COSIA along with other associations in the country are taking up the case with the respective state governments and the central government.

“We have written to all the concerned departments and requested to amend/clarify the GST rule for the long term lease with retrospective effect and give relief to the thousands of MSMEs from all over India by considering it in schedule III,” COSIA said.