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Monday, February 6, 2023
HomeNewsReal EstateMIDC plot transfers to third party are under GST scanner

MIDC plot transfers to third party are under GST scanner

The deals are being taken as lease which is classified as service and attracts GST. All such transfers since GST came into effect in 2017 are being now covered for the tax demand.

Businessmen having transferred their plots in MIDC’s industrial estates to others may soon have the taxman knocking at their doors. The central GST department is in the process of extracting 18% duty for such transactions.

The deals are being taken as lease which is classified as service and attracts GST. All such transfers since GST came into effect in 2017 are being now covered for the tax demand.

Tax consultants have questioned the department’s inaction in the last five years, and a sudden awakening on the matter fearing that it may create ripples among businessmen.

The directorate of GST intelligence (DGGSTI) which works against duty evasion is collecting data of such transfers since July 2017.

There is no GST on the original allotment by MIDC. However, if the individual allottees further lease the land to others than it is subject to tax.

The DGGSTI communication to MIDC says that it is in the process of verification of cases of plot transfers since July 2017 to confirm whether the transferor has paid the tax or not.

The Chamber of Small Industries Associations (COSIA) has come to the defence of the plot holders. “The Central GST Department has already begun issuing notices demanding tax on the total value of the land. This means that if the plot was transferred for Rs 1 crore to the third party then GST would be Rs 18 lakh,” said Julfesh Shah, chairman of COSIA in Vidarbha.

COSIA has also convened a meeting of various industrial associations at Mumbai on January 25. Shah says that it would have a largescale impact in the MIDC estates of Nagpur, and the rest of the state. Thousands of such units may have not paid GST assuming that exemption under notification dated 28 July 2017 would be available.

Shah argues that such transfers should not be considered as lease but sale. Even MIDC for practical purposes considers it as sale, because of the long term tenure of the lease due to which even the stamp duty is paid. Transfer charges are paid when the plot changes hands which is comparable to capital gains. Moreover, if GST is charged, there is no input tax credit available in this case, he said.

Sources say it is not new for businessmen to corner plots and later transfer it at a premium. The transfer charges are charged on the difference of new and old rates of MIDC. However, plots change hands for a much higher price.

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