long term lease of land (30 years or more) in the form of upfront payment or and/or periodic rent for construction of a project by a promoter
Any person
Promoter
This entry is inserted vide notification no 5/2019-CTR dated 29th march, 2019 and is effective from 1st April 2019. Though we are going to discuss taxation of real estate in a separate chapter in detail, here we will have a brief understanding of this entry just like previous entry regaridng FSI.
In many real estate projects, the land is not sold but leased for a long term, typically exceeding 30 years, with consideration paid either :-
- As a one-time upfront premium (commonly called "salami"),
- Or through annual or periodic lease rent, or both.
This structure was increasingly common in state development authorities' allotments and public-private partnerships (PPPs). Since the suppliers in such cases are often government authorities or unregistered persons, tax compliance was fragmented.
To address this and to centralize liability, GST law now mandates that the promoter receiving the lease for project development will be liable to pay GST under RCM, if the lease is 30 years or more.