GST on Land Lease

The GST vide Circular No. 101/20/2019-GST dated 30th April, 2019 has clarified the applicability of GST on land lease. The confusion around GST on land lease arises as some may consider land lease to be a

supply of service. In India, GST is applicable on supply of services related to letting out of commercial property. Hence, to clarify the stance of the Government the following circular was issued.

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Applicability of GST on Land Lease

As can be gleaned from the above circular, GST is

NOT applicable on land lease. However, the exemption is subject to the conditions that the lease must be for a period of 30 or more years and the following:

The industrial plots or plots for development of infrastructure for financial business should be provided by the State Government, Industrial Development Corporations or undertakings or by any other entity having 50% or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area.

Thus, upfront amount (called as premium, salami, cost, price, development charges or by any other name) for land taken on lease from any of the above entities or undertakings for a period of 30 or more years will be exempt from GST.

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Frequently Asked Questions

Common questions about GST on Land Lease.

The GST is not applicable on land lease, subject to certain conditions. According to the circular, upfront amount paid for leasing land from government entities or undertakings with 50% or more government ownership for a period of 30 years or more is exempt from GST.

The exemption applies when the land is leased from State Governments, Industrial Development Corporations, or any other entity having 50% or more ownership of the Central Government, State Government, or Union Territory. The land should be provided to industrial units or developers in an industrial or financial business area.

Yes, the land lease period should be for 30 years or more to be eligible for the GST exemption on the upfront amount paid for the lease.

No, the exemption is specifically for industrial plots or plots for the development of infrastructure for financial business. It may not apply to land leased for other purposes.

The circular aims to clarify the applicability of GST on land lease transactions, as there was confusion around whether leasing land constitutes a supply of service, which would attract GST.

The exemption is likely intended to promote industrial and infrastructure development by reducing the upfront costs associated with leasing land for such projects from government entities or undertakings.

The circular specifically mentions the exemption for the upfront amount paid for the land lease. It does not provide clarity on the GST treatment of periodic rental payments during the lease tenure.

The circular does not explicitly mention any other conditions apart from the lease period being 30 years or more and the lessor being a government entity or undertaking with 50% or more government ownership.

The circular does not specify the applicability period or effective date for the GST exemption on land leases. It is advisable to consult a tax professional or refer to additional guidelines for clarity on the implementation timeline.

The upfront amount, often referred to as premium, salami, cost, price, or development charges, is typically charged by the leasing entity to recover a portion of the land's value upfront, in addition to periodic rental payments during the lease tenure.