Schedule II of CGST Act Land and Building

[KUMAR Narasimhan]

2. Land and Building

(a) any lease, tenancy, easement, licence to occupy land is a supply of services;

(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

How to determine the Taxable value if in case of Leasing the property. Please clarify me in this regard sir

[KASTURI SETHI]

Sh. Kumar Narasimhan Ji,

Open market value. Peruse Rules 27 & 28 of CGST Rules, 2017 as amended from time to time.

[Shilpi Jain]

I think your query is incomplete. In case there is an agreed consideration between unrelated parties then such value should be adopted. If no such consideration or if the transaction is between related persons then go ahead with the value suggested by Kasturi sir.

[KASTURI SETHI]

Yes. Terms & conditions of the agreement/contract have to be taken care of. The Valuation Rules are to be resorted to, if the supplier of service is unable to determine assessable value otherwise. Rules are always subject to the Act.

[KUMAR Narasimhan]

Thank you Sir and Mam,

Lease of the Commercial property is ₹ 50 Lakhs for 5 years.

On the above case as mentioned by Sh. Kasturi ji, I will apply Open Market Value, Rule 27 & 28 of CGST Rules 2017.

[ABHISHEK TRIPATHI]

Dear Narasimhan Ji,

Agree with the views of KS Sir and Shilpi Ma’am. Taxable value is the transaction value i.e. price actually paid or payable, provided supplier and recipient are not related, and the price is the sole consideration [Section 15(1) of the CGST Act]. Mostly, it is your invoice value. [We refer to rules for the specific transactions]

Keep in mind the compulsory inclusions also, as stated in rule 15(2) of the CGST Act. Apart from the invoice if the expenses mentioned u/s. 15(2) is charged separately (apart from invoice) by the supplier then that will be added to the price (invoice value) to arrive at the taxable value. Generally, 15(2) is missed and the supplier consider invoice value only to arrive at the taxable value.

AI Summary

Lease of land and buildings as supply of services; taxable value is transaction value or open market value under valuation rules. Schedule II classifies leases of land and buildings as a supply of services. Taxable value is generally the transaction value where parties are unrelated and price is sole consideration; if not, determine assessable value by reference to open market value and the Valuation Rules (Rules 27 and 28). Terms of the agreement must be considered and compulsory inclusions under section 15(2) added to the invoice price to arrive at taxable value.