80:20 Rule calculation for building permit fees

[NUKALA KUMAR]

With respect to Notification No. 3/2019-Central Tax (Rate) dated 29th March 2019 whether permission fees paid to a competent authority are included in the shortfall calculation for the 80:20 rule under the GST ??

[Sadanand Bulbule]

 Plz refer Issue Id: - 118325 Dated: 14-01-2023 for more details.

[Sadanand Bulbule]

 Also refer Issue Id: - 119125 Dated: 24-05-2024

[YAGAY and SUN]

As per Notification No. 3/2019-Central Tax (Rate) dated 29th March 2019, the 80:20 rule mandates that at least 80% of the value of input goods and services must be procured from registered suppliers in order to avail the concessional rate. However, permission fees paid to competent authorities such as municipal bodies or government departments are statutory in nature and are not considered as supply under GST. Therefore, such fees do not fall within the scope of inputs or input services for the purpose of calculating the 80% threshold.

In line with CBIC Circular No. 122/41/2019-GST dated 30th October 2019, statutory payments like permit fees, RTO fees, or license fees are explicitly excluded from the input value calculations. Consequently, permission fees paid to a competent authority are not included in the shortfall calculation under the 80:20 rule specified in the notification.

[Shilpi Jain]

Pls chk if this permit fees is an exempt service whereby it should not be included in the 80:20 calculation.

AI Summary

Statutory permit fees are excluded from concessional input threshold calculations under GST and not counted in shortfall.
Statutory permission fees paid to municipal bodies, RTOs or government departments are not treated as supplies for GST and are excluded from the value of inputs or input services when computing the concessional procurement threshold; CBIC Circular No. 122/41/2019-GST supports this exclusion. Verify whether a given permit fee is an exempt service, which likewise would not be included in the threshold calculation.