GST on Long-Term Lease Fees for Hotel Projects
The Appellate Authority for Advance Ruling confirmed that one-time lease fees for hotel development are subject to GST.
- Ruling
- ORDER NO. GOA/AAAR/01/26-3/2018-19 4591 dated 22/3/19
- Dated
- 26 Mar 2018
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Goa Tourism Development Corporation asked if their 60-year lease fee was tax-exempt.
- The authority ruled the lease does not qualify for infrastructure development exemptions.
- GST applies because the project is for a hotel, not industrial or financial infrastructure.
In short
The company asked if a one-time fee for a 60-year land lease to build a hotel was exempt from Goods and Services Tax (GST). The tax authority looked at whether this project counted as developing infrastructure for financial business, which would have allowed for an exemption.
What has changed
How it worked before
Businesses often assumed that long-term land leases for large commercial projects might qualify for tax exemptions intended for industrial or infrastructure development.
What has changed
The authority decided that hotel projects do not meet the specific criteria for the exemption under Notification No. 12/2017-Central Tax (Rate). In practice, this means businesses cannot claim tax exemptions for land leases unless the project strictly aligns with the specific industrial or financial infrastructure purposes defined by the government.
Who this affects
Developers and government bodies entering into long-term land leases for commercial hotel or hospitality projects.
An example
Imagine a private developer leases land from a state agency to build a luxury resort. They might hope the one-time lease fee is exempt from GST. Based on this ruling, the tax department would likely view the resort as a commercial hotel project rather than industrial infrastructure, meaning the developer must pay GST on the lease fee.
What you should do
This ruling only applies to the specific business that asked the question. If you are planning a similar lease, do not assume you are exempt from GST; you must review your specific project against the exact wording of the exemption notification or consult a tax professional.
If you do nothing
If you assume this exemption applies to your business without confirmation, you risk underpaying your GST. The tax department may issue a demand notice for the unpaid tax plus interest and penalties. Being wrong on a tax interpretation can lead to costly legal disputes and financial strain.
The terms explained
- Advance Ruling
- A formal decision provided by tax authorities to a business regarding how tax laws apply to their specific transaction.
- DBFOT
- Stands for Design, Build, Finance, Operate, and Transfer; a common model for public-private partnerships in infrastructure projects.
- Exemption Notification
- An official government order that lists specific goods or services that are not subject to tax.
The ruling in detail
Appellate Authority for Advance Ruling
M/s Goa Tourism Development Corporation
ORDER NO. GOA/AAAR/01/26-3/2018-19 4591 dated 22/3/19 · Goa
Questions before the authority
- Whether GST is applicable on one time concession fees charged by the appellant in respect of their property at Anjuna, Goa, which is given to M/s Myrayash Hotels Pvt. Ltd for a long term lease of 60 years for development of infrastructure for financial business or private investment made on DBFOT basis.
Facts
The Appellant granted a long-term lease of 60 years for a property to M/s Myrayash Hotels Pvt. Ltd. on a Design, Build, Finance, Operate and Transfer (DBFOT) basis for the development of a hotel. The Appellant sought an exemption from GST on the one-time concession fees charged for this lease, claiming it fell under the scope of Notification No. 12/2017-Central Tax (Rate).
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of GST on one-time concession fees for long-term lease | GST is applicable; the exemption is not available. The transaction does not meet the criteria of being for the development of infrastructure for financial business. |
The Appellate Authority upheld the original Advance Ruling, confirming that the transaction is liable for GST. It concluded that the Appellant failed to satisfy the specific criteria required for the exemption under the relevant notification, as the project did not constitute the development of infrastructure for financial business.
Reasoning
The authority examined the conditions of Sr. No. 41 of Notification No. 12/2017-Central Tax (Rate) as amended. It determined that the lease was not for an 'industrial plot' or for the 'development of infrastructure for financial business' as intended by the statute. Furthermore, the lessee was not an industrial unit or developer in an industrial or financial business area. Consequently, the strict interpretation of the exemption notification led to the denial of the benefit.
Provisions relied on
- Section 100(1) of the Central Goods and Services Tax Act, 2017
- Section 101(1) of the Central Goods and Services Tax Act, 2017
- Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017
- Notification No. 32/2017-Central Tax (Rate) dated 13/10/2017
- Schedule II of the CGST Act, 2017
For the practitioner
This ruling clarifies that **strict interpretation** of exemption notifications is required, particularly regarding the specific purpose of land use. It serves as a precedent that long-term leases for commercial hotel projects do not automatically qualify for exemptions intended for industrial or financial infrastructure development. Practitioners should note that the **burden of proof** lies with the applicant to demonstrate that all conditions of an exemption notification are met.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/goa_aaar_01_26-3_2018-19_22.03.2019_gtvcl.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
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