AAR rules GST applicable on property rented out to partnership firm

AAR rules GST applicable on property rented out to partnership firm

The owner had approached the authority for clarity    

The Chennai Bench of the Authority for Advance Rulings (AAR) has held that the Goods and Services Tax (GST) was liable to be paid on properties rented out to the partnership firm by the partner to carry out the business. As the activity was in furtherance of the business, it was applicable even if no rent was being paid for the property.

The applicant, an owner of certain properties, is the managing partner in the partnership firm that operates its business on those properties free of rent. He stated that under the Income Tax Act if the partner used his property for business, the deemed rent did not arise. For clarity under the GST law, he approached AAR.

The bench comprising K Latha (member, State Goods and Services Tax) and TG Venkatesh (member, Central Goods and Services Tax) held that the property of the individual rented out to the partnership firm, was equivalent to 'supply' under the GST Act. However, the CGST Act, 2007 clearly stated that such an activity meant 'supply of goods' or 'service' or both between the related or distinct persons when done for furtherance of business.

AAR further held that if the supplies were between related persons, the cost of such provisions would be the open market value. But on non-availability, the supply of goods or services would be taxable under the IT Act.

The bench, thus, ruled that the property rented out for a business purpose, even without rent, by the partner attracted GST.