TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1105
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....cant) are registered under GST with GSTIN33AAQPS8495K1ZO.The applicant has sought Advance Ruling on the following questions: 1. Whether GST liability does arise in respect of property of the partner used by the Partnership Firm to carry out the business by the firm at free of rent? 2. If so, what is the relevant section or rule or provision in GST law under which the partner of the firm is required to pay GST on notional rent? 3. Is it mandatory to execute rental deed between partner and Partnership firm, when there is no furtherance of business for that partner? 4. What is the applicable valuation rule, when consideration is not fixed and not received by the Partner? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that he is the Managing Partner in the partnership and firm having certain properties in his name. The firm in which he is partner is carrying out the business in those properties at free of rent. He has stated that under the Income Tax Act, it....
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....; time. i. Details of the places in relation to which Ruling is sought ii. Details of activities carried on in such places iii. Details of EB, water charges in respect of such places iv. Copy of P&L statement and Balance sheet for two years v. Copy of partnership deed 3.2 The applicant vide their letter dated 15.12.2021 submitted the following facts: * Details of the places in relation to which advance ruling is sought and the activities carried on each place: * Details of EB Charges and water taxes paid for each places: No.7/10,12,13, Ranganathan street, T.Nagar, Chennai-17 Household Utensils showroom for own firm No.17/3,174, Ranganathan street, T.Nagar, Chennai-17 Textile Showroom for own Firm No.25/ 12, Ramanathan Street, T.Nagar, Chennai-17 Furniture & Home Appliances showroom for own firth No.8/2,Ramanathan Street, T.Nagar, Chennai-17 Godown / warehouse for home appliances for own firm No.4, Madley Road, T.Nagar, Chennai-17 Furniture & Home Appliances Showroom own firm No.164/6, North Usman Road, T.Nagar, Chennai 47 Home Appliances Showroom for own firm No.122/75 GN Chetty Road, T.Nagar, Chennai- 17 Furniture & Home Appliance....
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.... exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Lease includes Tenancy, Premium, Rights to use, etc. Hence, renting out of immovable property for business is to be treated as supply of service as per section 7(1)(a) ibid. * In the case on hand, the immovable property belonging to the partner of the firm is used by the partnership firm. As per Schedule I of supply of goods or services or both between related persons or between distinct persons as specified in sub section 4 of Section 25, when made in the course of furtherance of business is to be treated as supply even if made without consideration. * Valuation is to be done as per Section 15 of the CGST Act, 2017. In cases where value cannot be determined under sub-section (1) of Section 15, GST Valuation Rules are to be applied. As per 28 of CGST Rules, 2017 when the consideration is not wholly in Money then the open market value of supply of the rental premises would have to be considered for payment of GST. Such notional income is 'consideration' in terms of Section 2 (31) of CGST Act, 2017. * For the foregoing reasons....
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....stion, No.3 seeking clarification about execution of rental deed is procedural and that part of the question is not answered. However the later part of the question seeking clarification on whether such renting is in furtherance of business for the applicant is taken up for consideration. Thus the questions taken up for consideration is whether (i) GST is liable to be paid when a partner rents his property to his partnership firm; (ii) the value to be adopted in such situation and (iii) such activity of renting is in furtherance of business for that partner. 7.1 Applicant has stated that the activity of letting his own properties to the partnership firm, wherein he is the Managing Partner and holds 2/3 of the shares is not in furtherance of business and that he has not done anything in relation to business carried out by the partnership firm to mean furtherance of business. Though the term furtherance of business is not defined under GST law, the term business as defined under Sec 2 (17) and the term person is defined under Section 2(84) of the GST Act as follows: - Section 2 (84) 'person" includes- (a) an individual; (b)....... (c)..... (d) a firm; From the ....
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....own Firm No.7,9 Natesan Street, T.Nagar, Chennai- 17 Ladies Hostel for the staffs of the own firm No.34, Natesan Street, T.Nagar, Chennai-17 Gents Hostel for the staffs of own firm No.71,72 Ranganathan street, T.Nagar, Chennai-17 Gents Hostel for the staffs of own firm No. 7,18/19, Madley Road, T.Nagar, Chennai-17 Gents Hostel for the staffs of own firm From the, above, the properties are found to have been rented to the partnership firm for carrying on its activities such as Showrooms, Godowns/Warehouses and Hostels for their staff and also it is observed that the EB charges and water tax/ charges are being borne by the partnership firm as evidenced by the ledger extracts of the partnership firm pertaining to such payments. For the years after introduction of GST, the applicant has stated to have collected rent from the firm in respect of the properties listed above which has been reflected as Income from Property in the Income Tax Returns of the applicant. 7.2 Further the applicant in the capacity of the property owner, allows the partnership firm, in which he is a partner and Managing Partner of the firm along with his wife to carry on their business. As observed from ....
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....ds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; Applying the above, in the case at hand the applicant is the owner of the properties. He also holds 2/3rd of the shares in the partnership firm in which the Managing Partner and controls the firm. Therefore, the applicant and the firm who are separate persons are "Related Persons" for the purposes of this Act. Therefore, as per the above schedule, the supply of service between such related persons i.e., the applicant and the partnership firm, when made in the course or furtherance of business, the same is a taxable supply even when rendered without consideration. 8.2 In this regard, the applicant has relied on the Press release of CBIC dt. 13.07.2017, wherein old gold sold by an individual to a seller has been held not to be in course or furtherance of business. The reliance placed is not acceptable in the instant case as the furtherance of business is established here by the direct and continuous accrual of economic benefit to the applicant out of renting these premises., The sale of old gold by an individual is one-off sale and....
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............. (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed. Explanation. - For the purposes of this Act,- (a) persons shall be deemed to be "related persons" if- (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; Section 15 (1) stipulates the transaction value as the value to be adopted in cases where the supplier and recipient are not related. In the present situation, the applicant and the firm are related persons. Therefore, the value to be adopted is to be arrived at following the Valuation Rules as per Section15(5) of the Act. The relevant valuation rules are as follows:- Rule 28. Value of supply of goods or services or both between distinct or related persons, other than through an agent. - The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 ....