## Upfront Amount for Long Term Lease of Industrial Plots
Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for grant of long term lease (30 years or more) of industrial plots or plots for development of infrastructure for financial business by:
State Government Industrial Development Corporations or Undertakings, or
Any other entity having 20% or more ownership of Central Government, State Government, Union Territory
→ EXEMPT from GST
## Key Conditions
1. Lease term must be 30 years or more (long term)
2. The plot must be for industrial use or for development of infrastructure for financial business
3. Lessor must have ≥20% government ownership
4. Only the upfront amount is exempt (not periodic lease rentals, which are taxable)
Worked example
### Example 1
Example 1: XYZ State Industrial Development Corporation (100% owned by State Government) grants a 50-year lease of an industrial plot to ABC Manufacturing Ltd. for an upfront premium of ₹5 crore plus annual rent of ₹2 lakh.
Answer: The upfront premium of ₹5 crore is EXEMPT (long term lease ≥30 years, government entity). However, the annual rent of ₹2 lakh is TAXABLE.
### Example 2
Example 2: A private real estate company gives 40-year lease of an industrial plot for an upfront amount of ₹3 crore.
Answer:TAXABLE. The lessor must have ≥20% government ownership for the exemption to apply.
⚠️ Common exam mistakes
Applying exemption to leases below 30 years - the threshold is strictly 30 years.
Exempting periodic lease rentals - only the upfront amount is exempt.
Forgetting the 20% government ownership requirement of the lessor.
Extending exemption to commercial or residential plots - it is only for industrial plots/financial infrastructure.
Bare-Act text Entry 41 · Notification No. 12/2017-Central Tax (Rate) · click to expand
Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, of industrial plots or plots for development of infrastructure for financial business.