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A Pan-India MSME apex body -- Chamber of Small Industries Association (COSIA) has urged the government to revisit the issue of GST on leased land affecting Micro, Small & Medium Enterprises (MSMEs) across the country. COSIA president Sandeep Parekh said that the GST department has put the industry in a state of fear by sending summons and has started an investigation into how many transfers of leased lands have taken place in MIDC (Maharashtra Industrial Development Corporation) area since July 2017.

The department seems to be taking a stand after 5 years that on transfer of leased land from one party to the other comes under the purview of supply of service and hence 18 per cent is leviable on the transaction, though MIDC is exempt. If this really goes through then it will sound a death knell for all the MSMEs that have sold their plots since July 2017 and also future transactions. The initial lease of land from MIDC to the industry is exempt under GST. However, no specific exemption has been granted for further assignment of leasehold rights. This is a huge amount and especially for the MSME this is going to break their back.

This is a PAN-India issue and presently, there are thousands of units in Maharashtra alone, which have not paid GST on the assignment of leasehold rights of such land taken on lease from MIDC on the understanding that the ‘assignment of leasehold rights in land’ is akin to ‘sale of land’ and such transactions fall under Schedule III of the CGST Act on which GST is not payable. All have paid stamp duty as per the sale of land, and also paid the income tax on short-term and long-term gains considering as deemed ownership, and the premium is paid to MIDC for transferring the lease.