GST on 99-Year Land Leases: Rajasthan AAR Ruling
The Rajasthan Authority for Advance Ruling decided that a 99-year land lease is a taxable service, not a sale of property.
- Ruling
- RAJ/AAR/2019-20/10 dated 28.05.2019
- Authority
- 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
- Greentech Mega Food Park asked if a 99-year lease is a property sale.
- The Authority ruled that long-term leases are a supply of services.
- These leases are taxable under GST at an 18% rate.
- The transaction falls under HSN code 9972.
In short
Greentech Mega Food Park asked the Rajasthan Authority for Advance Ruling (AAR) if leasing land for 99 years counts as selling property, which would be exempt from Goods and Services Tax (GST). The company argued that such a long lease is effectively a sale. The Authority disagreed, confirming that leasing land is a service that attracts GST.
What has changed
How it worked before
Many businesses assumed that a very long-term lease, such as 99 years, was equivalent to a sale of immovable property and therefore outside the scope of GST.
What has changed
The Authority clarified that under the GST law, any lease or license to occupy land is a supply of services. This means businesses must pay 18% GST on these lease transactions, regardless of how long the lease period lasts.
Who this affects
Industrial park developers, real estate companies, and businesses entering into long-term land lease agreements.
An example
A logistics company plans to lease a plot in an industrial park for 99 years. They might wonder if they can avoid GST because the lease is so long. Based on this ruling, the park developer must charge 18% GST on the lease amount, and the logistics company must pay it.
What you should do
If you are planning a long-term lease, you should budget for 18% GST on the transaction. Remember that this ruling only binds the company that asked the question; it is not a law that applies automatically to your specific business or state.
If you do nothing
If you assume this ruling does not apply to you and fail to collect or pay GST on long-term leases, you risk a tax demand from your local officer. You may be forced to pay the unpaid tax plus interest and penalties later. Relying on a ruling that does not apply to your specific case can lead to costly disputes.
The terms explained
- Supply of services
- Under GST, this refers to any transaction that is not a sale of goods but involves providing something for a fee, such as renting or leasing property.
- HSN code
- A standardized system of numbers used to classify goods and services for taxation purposes.
- Advance ruling
- A formal decision provided by tax authorities to a specific business to clarify how tax laws apply to their particular situation.
The ruling in detail
Authority for Advance Ruling
M/s Greentech Mega Food Park Pvt. Ltd.
RAJ/AAR/2019-20/10 dated 28.05.2019 · Rajasthan
Questions before the authority
- Whether the Lease Agreement between the Applicant Company i.e. the lessor and the Lessee for a period of 99 years is a Sale of immovable property and outside GST and is exempt from levy of GST?
- If the present transaction of giving land on lease of 99 years is taxable under GST, then at what rate and what HSN Code is applicable?
Facts
The applicant is a special purpose vehicle established to set up a Mega Food Park. It intends to enter into lease agreements for 99 years with various industrial units for developed plots. The applicant contends that this long-term lease constitutes a sale of immovable property and is therefore outside the scope of GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Whether 99-year lease is a sale of immovable property outside GST | No, it is a supply of services The transaction is taxable under GST |
| Applicable tax rate and HSN code | HSN 9972, GST @ 18% (9% CGST + 9% SGST) None |
The Authority ruled that the 99-year lease agreement does not constitute a sale of immovable property but is a supply of services. Consequently, the transaction is taxable under the GST regime. The lease is classifiable under HSN 9972 and attracts GST at the rate of 18%.
Reasoning
The Authority relied on Section 7 of the CGST Act, which defines supply to include lease or rental of land. It noted that Schedule II of the CGST Act explicitly classifies any lease, tenancy, or license to occupy land as a supply of services. The Authority rejected the applicant's argument that the long-term nature of the lease equates to a sale, citing the Transfer of Property Act and relevant judicial precedents. It concluded that the transaction falls under HSN 997212, attracting the standard GST rate for such services.
Provisions relied on
- Section 7 of the CGST/RGST Act, 2017
- Schedule II of the CGST/RGST Act, 2017
- Section 105 of the Transfer of Property Act, 1882
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
For the practitioner
This ruling clarifies that **long-term lease agreements** for industrial plots, even for periods as long as 99 years, are treated as a **supply of services** under GST rather than a sale of immovable property. It settles the taxability of such arrangements for developers of industrial parks. Practitioners should note that this decision confirms the **taxability at 18%** for such leases, distinguishing them from specific government-led infrastructure exemptions.
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/AAR/raj.aar-2019-20_10-gmfppl.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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