New notices for GST on leasehold land transfers stir real estate concerns

The issue of tax implications of transferring leasehold land has come to the fore once again as the authorities have started to issue notices to recover dues for such a transfer. This has sparked a significant debate among industry stakeholders as it is expected to have a major impact on future transactions and the broader real estate market. The Goods & Services Tax (GST) authorities have recently issued these notices concerning the transfer of leasehold land. The crux of the issue lies in whether the transfer of leasehold land constitutes a sale of land or a service. According to the tax authorities, such transfers qualify as a service, subjecting them to an 18% GST. This tax is levied in addition to the stamp duty already imposed by respective state governments, adding a financial burden to these transactions. The key question that has arisen here is whether these transactions should be treated as a sale of land, which is traditionally exempt from GST, or as a service, thereby attracting the 18% tax.  This dispute has significant implications for businesses and individuals involved in such transactions, as the additional GST could increase the cost of acquiring leasehold land and ultimately homebuyer who may have to bear the burden of higher project cost. Some of these notices are issued now to ensure that the demands do not  become time barred and that these are within the period of limitation.
 

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