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TMI Blog2019 (4) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HA VING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED. * This application is being filed by E SQUARE LEISURE PRIVATE LIMITED ('Company'/ 'Applicant' / We') having its registered office at 132A, University Road, Ganeshkhind, Pune - 411 016. * The Company is engaged in various services including renting of immovable property to business entities for commercial purpose. The Applicant is discharging GST on the rent received from the lessees. The Applicant has also taken interest free security deposit (hereinafter to be referred as "security deposit') from the lessees. * The security deposit taken from the lessees on account of security against the damages, if any, caused to the furniture, equipments, fittings supplied along with the prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of consideration, and hence, forms part of value of the supply and consequentially get taxed. * Further, deposits will not form part of payment for the supply unless the supplier applies such deposit as consideration for the supply. Thus, only when the deposit is applied as consideration it becomes taxable and if it is held as security deposit or refunded, it is not taxable. * It is a common practice in the renting /leasing transactions to collect sums in the form of security deposit from the lessee. Further, it is important to mention that, usually deposit is pre-decided by the parties before or at the time of entering into an agreement. Also, rent/lease is collected over and above, as a consideration towards use of property. Therefore, the amount of rent/lease could very as per agreement and depends on various businesses, market, and commercial factors. * Typically, the prices of commercial immovable property are very significant and therefore Applicant has obtained these security deposits in order to safeguard itself from any contingent loss caused during the tenure of the lease period and it is a common commercial practice followed by all landlords while letting ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance has been received from the buyer of goods and the Excise Officer had evidence to prove that such advance has influenced the price of the goods by way of any discounts/offers, then in that case, the notional interest can be added to the assessable value to arrive at the appropriate Excise duty to be paid. * It is submitted that in the present case, the interest free refundable security deposits has not influenced the rent of the properties given to lessees. * Further, the decision in the case of M/s. Magarpatta Township Dev. & Const. Co. Ltd Vs. Commr. Of C. Ex. Pune III (2014 (33) STR 53 (Tri. Mumbai) = 2013 (7) TMI 669 - CESTAT MUMBAI, wherein; it was held that "The practice of taking security deposit for the premises rented out on lease basis is common throughout the country and the amount of security deposit taken also varies from place to place and also depends on the property, whether it is for commercial or residential purpose. There is no evidence available on record led by the Revenue to show that the notional interest on the interest free security deposit has influenced the consideration received for renting and it is only a presumption on the part of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and copy of Order by Stamp Duty authority, lessor has determined the rent at market value. Lessor has also made provision for increase in rent at fixed time schedule. Free refundable deposit does not provide for any additional consideration to the lessor. Therefore, interest/ notional interest on security deposit received by the lessor is not liable to GST. 04. HEARING The Preliminary hearing in the matter was held on 05.12.2018, Ms. Vaishali Kharde, C.A. and Ms. Shruti Gulecha C.A. appeared and made oral and written submissions for admission of application as per detailed contentions made in their ARA submissions. Jurisdictional Officer Ms. Kiran Sonawane was not present at the time of the Preliminary Hearing. The final hearing in the matter was held on 18.12.2018 Sh. Pritam Mahure, C.A., along with Ms. Vaishali Kharde, C.A. appeared and made arguments on submissions. Jurisdictional Officer Ms. Kiran Sonawane, Dy. Commr. of S.T.(E-201), Pune appeared and submitted their contention. We heard from both the parties during the course of the hearing. 05. OBSERVATIONS We have gone through the facts of the case, oral and written submissions made by the applicant as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; The definition of consideration is inclusive and the consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition it is clear that there should be a close nexus between the payment and supply and thus any payment/exchange/barter etc would be treated as consideration for supply and liable to GST. Prima facie a conclusion can be drawn wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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