Nagpur High Court Delivers Major GST Relief for Businesses
The Nagpur bench of the Bombay High Court has issued a significant ruling. It states that businesses do not need to pay Goods and Services Tax when they transfer plots originally allotted by the Maharashtra Industries Development Corporation to a third party.
Following a Precedent from Gujarat
The court based its decision on an earlier ruling from the Gujarat High Court. That case involved the transfer of land allotted by the Gujarat Industries Development Corporation. The Gujarat court referenced a central tax notification from June 2017. This notification prescribes a zero tax rate for a specific situation.
The zero rate applies to the one-time payment of charges for granting a long-term lease. This lease must be for more than 30 years and granted by a state government industrial development corporation to an industrial unit. The court observed that when the original allottee transfers the plot, the third party essentially becomes the new lessee of the development corporation. Therefore, the nil tax rate continues under this new arrangement.
Ending Uncertainty for Maharashtra Businesses
This ruling by the Nagpur bench provides crucial relief to businessmen across Maharashtra. Many had received notices demanding payment of GST dues for such transfers. Typically, land originally allotted to one company is transferred to another party. This transfer happens after obtaining prior permission from MIDC and paying a required charge.
However, GST authorities recently began sending notices to recover taxes on these transactions. This move created confusion and concern among the business community.
A Specific Case That Led to the Ruling
The judgment came in response to a petition filed by Aerocom Cushions Private Ltd, a company based in Nagpur. The Central GST department had issued a notice to Aerocom, demanding GST payment for a plot transfer. The plot was originally allotted to M/s Rishita Industries, which later transferred it to Aerocom.
Industry Leaders Welcome the Clarity
Julfesh Shad, Chairman of the Chamber of Small Industries Association, welcomed the court's decision. He stated that the ruling removes a long-standing ambiguity in tax interpretation. It also prevents an unwarranted tax burden on genuine business transfers. COSIA had actively raised this issue at various forums to seek resolution.
The High Court's clarification is expected to streamline property transactions involving MIDC plots and boost business confidence in the state.
