Question14:

As per Notification No. 41/2016- ST dated 22.09.2016, service provided by State Govt. Industrial Development Authorities to industrial units by way of granting long term lease of industrial plots has been exempted from so much of service tax leviable thereon on the one time upfront amount payable for such lease.   In certain cases, the open land in the industrial area is allowed to be used by the power supply units for using the said land for erection and commissioning of the over head transmission towers which are used for providing the electricity to the industrial units in that area. These pieces of land are not allotted to any industrial units but are in possession of the Development Authority.  The Development authority is charging a lump sum amount from the said units for a lease of the said pieces of land for a period of 30 years or more and claiming exemption under the said notification.  It is requested to clarify as to whether this activity will be covered by the said notification or the same can be classified as  "Renting of Immovable Property Service" and accordingly service tax be paid on the same since these pieces of land are not used for industrial purpose and are not to be treated as Industrial Plots.

Answer:

 (A)  Notification No. 41/2016-ST dated 22.09.2016 had granted one time exemption from payment of Service Tax to industrial units on plots leased to them on long term basis by State Govt. Industrial Development Authorities/Undertaking.   Clause 90(a) of Section 65 of the erstwhile Finance Act, 1994 defines the term "renting of immovable property". According to the definition, the said term included renting, letting, leasing licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce. The activity might have been called by any name; it was covered under the term renting of immovable property.  The activity was subject to Service Tax under the provisions of erstwhile Finance Act, 1994 but for the exemption Notification mentioned above which had exempted the activity when lease of land was being done on long term basis by the above said development authority.

(B)  As regards the second part of your question regarding one time charges being levied by the said authority on pieces of land on which facility for electric supply has been created, it is observed that the activity may be called leasing or renting of land, it means the same thing as far as levying of Service Tax is concerned.    Our concerted opinion on the issue is that in view of exemption Notification mentioned above, no Service Tax is payable on leasing charges relating pieces of land on which facility for electric supply has been created as the entire activity is inter-twined.   (Reply dt. 04/12/2017)