Court Buzz, GST

Karnataka AAR allows exemption of tax under the general exemption of Rs.20 lakhs.

Case: Midcon Polymers Pvt. Ltd.

Forum: Karnataka AAR


The Applicant had proposed/ planned for engaging in the business of renting of commercial property on monthly rents and allied business. The Applicant do not have any taxable activity other than the activity of leasing out Immovable Property commercial spaces and hence were claiming exemption since their turnover is less than Rs.20 Lakhs.

The Applicant sought a ruling on the following questions:
i) For the purpose of arriving at the value of rental income, whether the applicant can seek deduction of property taxes and other statutory levies.

ii) For the purposes of arriving at total income from rental, whether notional interest on the security deposit should be taken into consideration.

iii) Whether the applicant is entitled for exemption of tax under the general exemption of Rs.20 lakhs.

Key points

For the first question the AAR ruled that the Applicant and the recipient are not related; price is the sole consideration of the supply and monthly rent is the price payable. It was concluded that the property tax is not deductable from the value of taxable supply of “Renting of Immovable Property” service.

In view of the second question the AAR concluded the notional interest has to be considered as part of value of supply of service, if and only if the said notional interest influences the value of supply and is leviable to GST along with monthly rent at the rate applicable to monthly rent.

For the final question the AAR ruled that in view that the Applicant has no other business besides what they have submitted to the Authority, they are entitled for the general exemption, subject to the condition that their annual total turnover which includes monthly rent and notional interest, if it influences the value of supply, does not exceed the threshold limit.

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