TN AAR: GST Levy on Rent of Partner’s Property to Firm for Enterprise

The properties rented out by the partner to his partnership firm are subjected to pay the GST specified by Tamil Nadu authority for the Advance Rulings (TNAAR). The same would be applied despite when there is NIL rent.

The petitioner, Chennai-based Shanmuga Durai is the Managing Partner of a partnership firm and indeed owns individual properties. The company in which he is a partner is engaged in businesses activities without paying rent. In his application, he mentioned that beneath the income tax act that the property he uses for his businesses.

The petitioner asked 4 issues. Firstly if the GST liability has come for the property of the partner used by the partnership firm to carry out the business by the firm, free of rent. The second one if it is then what is the concerned section or rule in the GST law beneath which the partner of the company is needed to furnish the GST on notional rent? The third is it essential to initiate the rental deed amid partner and the partnership company when there is no more business to be carried out subsequently? Fourth is what is subjected valuation rule when the consideration is not been set and not obtained through the partner?

Post to the proceeding via all facts and arguments AAR held that in which the supply is amid the concerned individual the value of these suppliers would be the open market value of that. If the open market value is not available then the value of goods or services supply like the kind and the quality would be taxable value.

Moreover, the same would mention that in this specific way the property being rented and the supplier and the recipient are concerned. As per that rule 28 concerned with specifying the value of supply of goods/services or both between different or connected individuals of GST Act will apply. As per that the value must reach for taxation purposes.

“The activity of renting out immovable properties owned by the applicant as an individual person to the partnership firm, another individual person, in which he is a major shareholding partner and Managing Partner, even without consideration, is a taxable supply,” AAR told.

The same is subjected that the GST is needed to be furnished for the properties of the petitioner rented for the partnership firm for running a business despite it takes no rent as the “activity is in furtherance of business and amount to supply” according to the GST law.

AAR ruling is subjected to apply on the petitioner and the jurisdictional tax officer in that specific concern. But the same would depend on the same matters. Indeed the Central Board of Indirect Taxes and Custom (CBIC) hold conclusions through AAR (Authority for Advance Ruling) as well as the Appellate Authority (AAAR) in making the amendments in rules for each individual.