Non-payment of GST amount from invoice, by tenant.

[Arvind N]

Dear Sirs/experts!

I have rented out my commercial premices for business to a tenant. Tenant, a corporate, is doing business for past 2.5 yrs, successfully. For last couple of months, they are holding GST amount & only paying the rest of the total invoice rent amount, stating that, I have to pay the GST first, after the same gets reflected from their side, they will release the same paid GST amount back to me. As I am paying GST quaterly, I have not yet got the GST back for the previous month's, as only after the 3rd month GST payment, they will get the payment reflected from their side.

Sirs, are their doings legally correct ?

Please put some light on this situation.

Thanks & best regards,

Arvind.

[KASTURI SETHI]

This is totally wrong practice. Your tenant cannot withhold the amount GST. As per Section 9(1) of CGST Act, your tenant is required to pay GST to you every month for further transfer to Govt. account. You are supposed to pay GST every month while filing GSTR 3 B.

[KASTURI SETHI]

In continuation of above, also go through the following :-

SECTION 13.Time of supply of services. - (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.

(2) The time of supply of services shall be the earliest of the following dates, namely :-

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under [* * *] section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under [* * *] section 31 or the date of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply :

In your case service stands provided as the rented premises are in possession of tenant continuously. You are supposed to pay tax every month and not quarterly.

[YAGAY andSUN]

Statutory levies/dues are required to be paid within prescribed time limit, and if not paid then the concerned Government can recover it as per the provisions Land Act. Further, your tenant cannot defer in paying the GST amount. In our view it must be paid along with the rent amount as per the terms and conditions of the contract as entered/executed by both of you.

[KASTURI SETHI]

M/s.Yagay and Sun, Sir, Thanks a lot for your finishing touch and concluding views.

[Mr Rao]

Dear Querist,

There is no provision to pay GST on quarterly basis as of now. Hence, your payment on quarterly basis is not correct. Further, as rightly said by experts, your tenant cannot withhold GST amount and releases only on payment made by you is not correct. Your payment of tax on quarterly basis tantamount to payment of tax belatedly and attracts interest also as per the provisions.

[Arvind N]

Dear Mr Kasturi Sethi sir, Dear Yagay and Sun sir, Dear GB Rao sir!,

Thank you all so much with very fast & pointed replies /\.

Every month, I am filing & paying GSTR 3B with relevant sum of money but, the GSTR 1 will be filed at the end of 3 rd month only, as I am on quaterly scheme of payment. Only after filing GSTR 1 from my side, in third month of every quarter, the tenant gets the same reflected in GSTR 2A, on his side.

The tenant is advocating with this & asking me & all building owners to pay GST from our pockets.

Best regards,

Arvind.

[KASTURI SETHI]

"The tenant is advocating with this & asking me & all building owners to pay GST from our pockets."

This is a wrong practice and not in letter and spirit of CGST Act.

[YAGAY andSUN]

The GST is a consumption/ a new form of Indirect Tax which subsumed the various duties/cess/taxes/local levies in it. The ultimate burden of Indirect Taxation is always on the end user or on the person who is the ultimate consumer of goods and service or of both. Therefore, being GST is an Indirect Tax, your tenant cannot refuse to pay the GST Amount which is his statutory liability to pay you off as you are just acting as an agent of Government to levy, collect and pay it off the exchequer.

[CA Seshukumar]

Dear Aravind

A simple solution for your concern is as follows.

As your team to save the GSTR-1 data on portal. But don't submit the same.

It will show in thier 2A. But status as saved. This is fine for your tenant.

Or i suggest to have a contract detailed called out about both parties rights and obligations.

[Ganeshan Kalyani]

The govt has put a restriction on the customer to claim ITC only when the tax appears in GSTR-2A report. Even in the GST annual return the taxpayer is supposed to give reconciliation of ITC taken and the ITC populated in 2A. If the invoice does not appear ITC will be disallowed. It amounts to double loss to the customer. One he pays GST to the supplier and second the ITC is disallowed. That is the reason, most of the customers are brining in such practices.

However, as per the GST provision, of sec 9(1) of CGST Act, the customer cannot withhold the tax component. I agree with the experts on this.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Your advice is 100% perfect. I always appreciate your virtues of honesty and sincerity.

[YAGAY andSUN]

Tenants can delay but have to pay rent, says Delhi HC

Tenants in the Capital are liable to pay rent for the period the city has been under lockdown, the Delhi High Court has held, stating that suspension of rent owed for that period is not permissible.

https://www.hindustantimes.com/cities/tenants-must-pay-rent-for-lockdown-period-delhi-hc/story-Ic6gTeceZNWDshnmioVumO.html

[KASTURI SETHI]

The Supreme Court has rejected the plea (of tenants) for a waiver on rent.
Meaning the payment of rent Can not be refused and is mandatory for the tenant for any property that they occupy.
The order was passed on the plea of lawyers requesting to waive off the rent of their chambers during lockdown which was rejected by the court and is applicable to all properties whether residential, industrial or commercial.

https://www.deccanherald.com/national/covid-19-sc-declines-plea-for-rent-waiver-relief-for-lawyers-831845.html

[YAGAY andSUN]

Through the above mentioned settled legal position, in nut shell it is concluded that rent along with applicable GST, is payable by the Tenants.

[KASTURI SETHI]

Yes, Sir. No escape route for tenants.

AI Summary

Tenant Must Pay GST Monthly with Rent; Withholding Violates CGST Act and Statutory Obligations A landlord raised a concern about a tenant withholding the GST portion of rent payments, claiming GST must be paid first by the landlord and then reimbursed. Experts in the forum clarified that this practice is incorrect under the CGST Act. The tenant is obligated to pay GST monthly along with rent, and any delay in the landlord's quarterly GST filing does not justify withholding. The landlord is advised to ensure monthly GST payments to avoid penalties. The tenant's refusal to pay GST contradicts statutory obligations, as GST is an indirect tax ultimately borne by the consumer.