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In a groundbreaking move to avoid the 18% Goods and Services Tax (GST) levied on property auctions based on lease deeds, the Ahmedabad Municipal Corporation (AMC) will now offer its newly built properties for direct sale instead of the customary 99-year lease. However, this reform does not extend to open land plots.
The AMC's Standing Committee is slated to make a landmark decision regarding this policy shift soon, deciding on the sale of eight shops in Chandkheda's new EWS scheme at a rate of Rs 1.21 lakh per square metre.
Earlier this month, the civic body invited bids for an auction of 68 shops in the newly built Sindhu Bhavan parking complex. Astonishingly, this auction was based on a 99-year lease, obligating the corporation to an 18% GST payment, or a hefty Rs 36 crore. The auctioned property, encompassing a carpet area of 12,868 sq m, was valued at Rs 197 crore.
Historically, the AMC has conducted several high-value property transactions based on 99-year leases. Four plots were previously auctioned for Rs 240 crore under this model. This practice caught the attention of the state government's SGST department, which ordered the AMC to remit 18% GST— amounting to Rs 43 crore—since the transaction was conducted via lease deed. This sparked an ongoing contention between the AMC and the state GST department.
The GST issue was further complicated when the Confederation of Real Estate Developers' Associations of India (CREDAI), Gujarat Chapter, proposed in May this year that AMC sell its properties through sales documents instead of lease deeds. This prompted the AMC to enact a resolution adhering to the policy of the Ahmedabad Urban Development Authority (AUDA) to sell properties through sale deeds.
A similar policy had proven successful for AUDA three years ago when it sold three plots located in the city's western part, based on sale deeds for Rs 163 crore. These included a plot in Prernatirth Derasar, another in front of Zydus Hospital, and one on the new CG Road.
In conclusion, the shift from lease deeds to sale deeds by the AMC marks a significant transition in the civic body's policy. While the ongoing tussle with the state GST department persists, this new approach aligns with the broader industry trends and caters to the demands of stakeholders, potentially setting a new norm for other municipal corporations nationwide.
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