The Government of India has been continuously supporting MSMEs, which are the second highest employers in the country, providing 12 crore jobs and contributing 29% to the GDP and more than 50% towards exports. However, recently, notices are being issued left, right, and center to MSME members by the GST departments regarding the assignment of lease done by them on MIDC plots. This is draconian and detrimental to the MSMEs who look forward to expansion by selling their plots through assignment. Although land is a state subject and full stamp duty is charged by the state, considering it as a sale of land, the GST department is treating this as a service, considering the assignment of lease.
During the Service Tax regime, before 2017, this was not considered a service. For the 5 years since the introduction of GST, the GST department has not issued a single letter to any of the assessees, assuming this is exempt under Schedule 3. Additionally, the Income Tax Department considers this as deemed ownership and charges capital gains tax on such land and buildings. With all the above taxes in addition to MIDC transfer premium, if 18% GST is payable on the assignment of lease, it will place a severe burden on MSMEs, creating an additional 18% investment burden and increasing their overall financial strain. Due to the non-availability of ITC in certain cases, there will be cash flow constraints, a risk of business closure, negative impacts on employment, and limited investment in growth and development.
It is observed that only GST offices in Maharashtra, Gujarat, and parts of Noida have been taking action, although this is a pan-India issue.
Several representations have been made by COSIA to various departments in Delhi, including the GST Council and the Union Finance Ministry, but no replies have been received from any of them. It is important that either the assignment of lease is considered under the expression of sale of land appearing in Schedule 3 or a notification is issued stating that subsequent assignment by the lessee in SIDCs should be exempt, both with retrospective effect.
As a result, COSIA has now filed a writ petition before the Hon’ble Bombay High Court seeking relief in this matter.
