TaxTMI 
TaxTMI 
GST RCM on rent-applicability in the case of property taken on lease
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....ST RCM on rent-applicability in the case of property taken on lease<br> Query (Issue) Started By: - Prashanth G Dated:- 18-2-2025 Last Reply Date:- 8-4-2025 Goods and Services Tax - GST<br>Got 8 Replies<br>GST<br>One of the clients- a dealer registered under GST- is running his business in a shop taken on lease for 8 years by paying Rs 8 lakhs as the lease amount. As per the terms of lease, this a....
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....mount will be refunded by the Lessor after the lease period. Whether GST RCM on rent is applicable on this case? If yes, how to calculate monthly rent / RCM? Reply By RAHUL MODI: The Reply: 1. GST on Refundable Security Deposit As per Section 2(31) of the CGST Act, 2017, a security deposit is not considered as consideration unless it is adjusted against rent or forfeited. * If fully refundabl....
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....e and does not influence rent → No GST applicable. * If adjusted towards rent → GST at 18% applies on adjusted amount. 2. Notional Interest on Security Deposit * The Karnataka AAAR ruling in Midcon Polymers Pvt Ltd (2021 (1) TMI 554 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA) held that notional interest on a security deposit is taxable only if it influences the rental value....
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..... * If rent is at market value and remains unaffected by the deposit, notional interest is not included in taxable supply. 3. RCM Applicability on Rent * If the lessor is registered under GST: The lessor will charge 18% GST on rent. * If the lessor is unregistered: The lessee must pay GST under RCM @18% on rent. * RCM does not apply to refundable deposits unless adjusted against rent. Su....
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....ggestions & Compliance Measures: ✔ Clearly state in the lease agreement that the deposit is refundable and does not affect rent. ✔ If the deposit impacts rent, compute notional interest and include it in taxable value. ✔ Pay GST only on rent, not on the deposit, unless adjusted or forfeited. The applicability of GST should be reviewed on a case-to-case basis considering th....
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....e lease terms and judicial precedents. 🚀 Reply By Prashanth G: The Reply: Dear Sir, Thanks for the reply. Reply By Ganeshan Kalyani: The Reply: Such arrangement is called as 'Pagdi' system in Maharashtra. Also called as heavy deposit rental home. Since, it is not rent as such and only a deposit refundable on termination of contract, GST is not applicable on lease amount. Reply....
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.... By Sadanand Bulbule: The Reply: Beautifully clarified Sir Reply By Prashanth G: The Reply: The question posted started when reading an explanation of Notification No. 16/2018-Integrated Tax (Rate) wherein it was stated that "renting of immovable property" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property,....
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.... with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. That is to say leasing also comes in the ambit of the definition of renting of immovable property. Please throw more light on this. Reply By Shilpi Jain: The Reply: Leasing and renting are ....
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....almost synonymous. In case there is taxability, valuation has to be done as per rule 27, i.e. adopting open market value for the rent. Do not consider notional interest as the taxable value. Reply By Prashanth G: The Reply: Thank you Madam. Reply By KALLESHAMURTHY MURTHY: The Reply: Dear sir, Very well analysis by RAHUL MODI. <br> Discussion Forum - Knowledge Sharing ....