DAMAGES SAC NUMBER

[S.C. WADHWA]

Dear Expert, A building has been given on lease rent in year 2010.A dispute has arisen for fixation/revision of rental claim. Presently, rental income being received ₹ 15 lac per month. A notice has been served upon the tenant requiring it to vacate the premises with in 30 days of receipt of notice. If the tenant fails to vacate the premises as aforesaid. it shall be required to pay damages of ₹ 30 lac per month. However till now the tenant has not vacated the premises and paid rent as per existing practice(₹ 15 lac P.M) for three months after the issue of notice. Now my query is:-

1) How we should file GST returns for the concerned three months i.e whether to show the rental income or damages income.

2) Which amount should be considered in course of filing of GST returns i.e whether ₹ 15 lac or ₹ 30 lac. If answer to question 1 is damages income, which SAC should be used.

REGARDS,

WADHWA

[KASTURI SETHI]

The matter is in dispute. You have not received ₹ 30 lakhs on account of damages so far. At present you are receiving rent only and NOT damages. Regarding claiming damages from the tenant, the matter may travel to the court. So file returns under the category of 'Renting of Immovable Property'.

However, claiming damages are classified as under :-

As per Schedule-II to the CGST Act

“5(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”.

HSN 9997 (999794).

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. You have to show the rent income received from your tenant and not the damage income. Even if you raise a Tax invoice for "Liquidated damage" of double the rent value then you will be bound to pay the GST @18% on the damage income to the govt by due date. If you pay this amount and file return your tenant will be able to claim 18% GST which you have paid. Instead, you may send him legal notice. In legal language, if you keep receiving the rent income from tenant it is deemed that you agree for this stat in the rented property. Thanks.

[Ganeshan Kalyani]

Please read "stat" as "stay".

[YAGAY andSUN]

Following link will be useful for you to understand this matter in details.

https://www.taxtmi.com/article/detailed?id=9223

AI Summary

GST on renting of immovable property: report rent received; liquidated damages invoiced treated as separate taxable supply. Rent received under the lease must be reported as renting of immovable property for GST because damages have neither been invoiced nor received; if an invoice is raised or payment received for liquidated damages, that amount constitutes a separate taxable supply attracting GST and obliges the landlord to discharge tax while enabling the tenant to claim input tax credit.