Property tax is not deductible from the value of taxable supply of “Renting of Immovable Property” service

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Midcon Polymers Pvt Ltd 

It could easily be inferred from Section 15(2) that any taxes, duties, cess, fees and charges, levied under any law for the time being in force, shall include in the value of taxable supply. In the instant case the property tax is levied, under the Karnataka Municipalities Act 1964, by the BBMP in Bangalore. Further the only exclusions from the value of the taxable supply are the taxes, duties, cess, fees and charges levied under the GST Act. 

Hence, property tax is not deductable from the value of taxable supply of “Renting of Immovable Property” service.

The security deposit collected by the applicant shall not be considered as payment made for supply of RIS service unless the applicant applies such deposit as consideration for the said supply, in terms of proviso to Section 2(31)(b) of the CGST Act, 2017.

In the instant case the security deposit, is taken as a guarantee against damage to property, is an interest free refundable deposit which will be returned to the lessee at the expiration of the lease period and hence shall not be considered as consideration for the supply of RIS service. However, at the expiry of the lease tenure, if the entire deposit or part of it is withheld and not paid back, as a charge against damages etc, then at that stage such amounts not refunded will be liable to GST.

Further, any notional interest on the security deposit has to be considered as part of value of supply of service, if and only if the said notional interest influences the value of supply i.e. value of RIS service / monthly rent and is leviable to GST along with monthly rent at the rate applicable to monthly rent.

Details can be accessed here : ckfet3t8fbz510874qoez8gk7|Midcon Pol

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