No GST on Upfront Lease Premium for Long Term Land Leases
The Uttar Pradesh advance ruling authority decided that upfront charges for long-term land leases of 30 years or more are exempt from GST.
- Ruling
- Order No. 09 dated 06.06.2018
- Dated
- 06 Jun 2018
- 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
- Authority asked if upfront land lease premium attracts GST
- Ruled that 30-year or longer land leases are exempt from GST
- Applies to state industrial development bodies allocating land for healthcare
- Exemption requires satisfying conditions of Notification 12/2017 entry 41
In short
Yamuna Expressway Industrial Development Authority asked whether it needs to collect Goods and Services Tax (GST) on upfront premium or salami charged when leasing plots for 30 years or more to set up hospitals and diagnostic centers.
What has changed
How it worked before
Before this ruling, organizations leasing government land for healthcare and infrastructure projects were unsure whether upfront lease payments were treated as taxable services under GST.
What has changed
The tax authority ruled that upfront lease charges, like premiums or development fees, for leases of 30 years or more are completely exempt from GST under entry 41 of Notification No. 12/2017-Central Tax (Rate). This applies when a state government industrial development corporation grants the lease. It lowers the initial setup cost for projects like healthcare centers.
Who this affects
Government industrial development bodies, infrastructure developers, and entities securing long-term land leases from state corporations for industrial or healthcare projects.
An example
A private business leases a plot from a state development corporation for 35 years to build a diagnostic center. The state body charges a one-time upfront fee as lease premium. Based on ruling UP_AAR_09, this upfront fee would not attract GST, provided the state body qualifies under the specific tax notification. The private business must confirm that its local tax officer agrees before withholding tax.
What you should do
If you are acquiring land on a long-term lease from a state authority, check if your lease agreement meets all conditions in Notification No. 12/2017. Remember that an advance ruling applies only to the applicant that requested it, so you should consult your tax advisor before assuming this exemption applies to you automatically.
If you do nothing
Assuming this ruling covers your business automatically without verifying eligibility can result in unpaid tax demands. If a tax officer finds that your lease does not qualify under the notification, you will be liable to pay the unpaid GST along with interest and penalties.
The terms explained
- upfront premium
- A single, one-time fee paid at the start of a lease contract to secure rights to the land.
- long-term lease
- A agreement allowing land use for a specified extended period, defined as thirty years or more under this tax rule.
- advance ruling
- A written tax decision given by tax authorities to a specific applicant explaining how tax law applies to their transaction.
The ruling in detail
Authority for Advance Ruling
M/s. Yamuna Expressway Industrial Development Authority
Order No. 09 dated 06.06.2018 · Uttar Pradesh
Questions before the authority
- whether GST is applicable on upfront amount (called as premium/salami) payable in respect of services by way of granting of long term lease of the thirty years or more for plots catering to public health care such as hospital, nursing home, diagnostic centers etc
Facts
The applicant is a State Government Industrial Development Authority engaged in granting long-term leases of plots for 30 years or more. It sought clarification on whether upfront premium or salami collected on granting long-term leases for plots dedicated to public healthcare infrastructure, such as hospitals and diagnostic centers, is liable to GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Upfront amount (premium/salami) on long-term lease (30+ years) of healthcare/infrastructure plots | Exempted / GST not applicable Subject to fulfilling all conditions specified under Sl. No. 41 of Notification No. 12/2017-Central Tax (Rate) as amended by Notification No. 32/2017-Central Tax (Rate) |
The Authority held that GST is **not applicable (exempted)** on upfront amounts for long-term leases of 30 years or more. This exemption applies strictly provided all conditions specified under **Sl. No. 41 of Notification No. 12/2017-Central Tax (Rate)**, as amended, are fulfilled.
Reasoning
The ruling relied on a plain reading of Sl. No. 41 of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 32/2017-Central Tax (Rate). This entry exempts upfront amounts (premium, salami, cost, development charges) for granting long-term leases of 30 years or more for industrial plots or infrastructure development plots provided by State Government Industrial Development Corporations or Undertakings. Consequently, if the applicant meets all statutory criteria under the entry, the exemption is fully applicable.
Provisions relied on
- Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (Sl. No. 41)
- Notification No. 32/2017-Central Tax (Rate) dated 13.10.2017
For the practitioner
This ruling establishes that **upfront lease premium or salami** for long-term leases of 30 years or more granted by State Government industrial undertakings is **exempt from GST**, provided all conditions under Entry 41 are fully satisfied. It reinforces exemption coverage for infrastructure plots including public healthcare facilities.
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/up_aar_09_06.06.2018_yeida.pdf
Legibility of the scan, as read: high.
Prepared 18-10-2026.
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