Restoration charges paid by tenant to society on behalf of landowner -GST implication

[KSA Associates]

ABC Ltd. (A registered person) paid the restoration amount directly to the society wherein the invoice was raised on  Landlord (unregistered). ABC Ltd is going to adjust the paid amount towards monthly rent.

What is GST Implication of this Transaction. whether the restoration paid on behalf of landlord and later collected by landlord will come under other recovery?

 

[Sadanand Bulbule]

The restoration charges paid by ABC Ltd on behalf of the landlord and subsequently adjusted against rent do not amount to a separate taxable supply or “other recovery” by ABC Ltd. However, in terms of Section 15(2)(b) of the CGST Act, the amount represents a liability of the landlord discharged by the tenant and therefore forms part of the value of renting services. Any GST liability, if applicable, would arise in the hands of the landlord on the enhanced rental value.

Final Takeaway:

There is no GST exposure for ABC Ltd on the reimbursement/adjustment. The tax implication, if any, travels with the rental supply and rests entirely with the landlord, since the restoration amount merely augments the value of rent.

[KASTURI SETHI]

ABC Ltd. is not liable to pay tax on restoration charges. However, restoration charges are to form the part of taxable value at of the hands of landlord, if the aggregate turnover of the landlord exceeds threshold limit as prescribed under Section 22 (1) of CGST Act.

I endorse the views of Sh.Sadanand Bulbule, Sir.

AI Summary

Restoration charges and GST: tenant-paid restoration amounts augment taxable rent and attract tax liability in landlord. Restoration charges paid by a tenant on behalf of the landlord are not a separate taxable supply by the tenant but form part of the value of renting services; any GST liability therefore arises in the hands of the landlord when the landlord's taxable status requires registration, since the tenant's payment discharges a landlord liability and augments the taxable rent.