No GST on fees paid to State government for change of land description

The Kerala Authority for Advance Ruling (AAR) has determined that fees paid to the state government for changing a land's description from wetland to dry land are not subject to GST. This ruling applies because the service provided by the government is related to functions entrusted to a Panchayat under the Indian Constitution. Therefore, such payments are not considered a supply of goods or services for GST purposes.

The AAR, Kerala, in the matter of Manappuram Finance Limited [Advance Ruling No. KER/13/2023 dated April 03, 2023] ruled that the payment made to state government for the change of land description does not attracts GST since, the service provided by the State government are covered is in relation to a function entrusted to Panchayat under Article 243G of the Constitution.

Facts

M/s. Manappuram Finance Limited ("the Applicant") is a non-banking financial company. The Applicant generates income from gold loans, money transfer business, purchase, and sale of foreign currency etc. and owns a land in Valapad village in Thrissur district which is a wetland as per the records of the village authorities. 

The Applicant had paid the fees to the State government as per the provisions of Kerala Conservation of Paddy land and Wetland Act, 2018 for change in description of land from wetland to dry land in the village office records for the purpose of construction of office complex.

The Applicant filed an application before the AAR, Kerala, seeking the clarification whether payment made to the state government for change of land description attracts GST under reverse charges or not.

Issue

Whether the payment made to the State government regarding the change of land description attract GST under reverse charge?

Held

The AAR, Kerala, in Advance Ruling No. KER/13/2023 held as under:

• Noted that, the Applicant had deposited the payment to state government for the change of land description in which they wanted to do construction of office complex.
• Observed that, the activity being undertaken by the state government as a public authority in relation to a function entrusted to a panchayat under Article 243G of the Indian Constitution is neither a supply of goods nor a supply of services in terms of Notification No. 14/2017 Central Tax (Rate) dated June 28, 2017.
• Held that, the payment made to state government cannot be treated as supply of goods nor supply of service in terms of Notification No. 14/2017 Central Tax (Rate) dated June 28, 2017 thus it does not attracts GST under reverse charge.