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TMI Blog2022 (2) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as provision of service against consideration - the properties are found to have been rented to the partnership firm for carrying on its activities such as Showrooms, Godowns/Warehouses and Hostels for their staff and also it is observed that the EB charges and water tax/ charges are being borne by the partnership firm as evidenced by the ledger extracts of the partnership firm pertaining to such payments. For the years after introduction of GST, the applicant has stated to have collected rent from the firm in respect of the properties listed above which has been reflected as Income from Property in the Income Tax Returns of the applicant. The rent free accommodation if so provided by the applicant indirectly accrues as profit for the firm which is enjoyed by the applicant as partner. So the economic benefit accrues to him and hence this supply is in the course of and furtherance of business only. Thus it is evident that the applicant in the course of furtherance of business has rented out the properties for commercial use to the partnership firm which is a separate person - in the case at hand the applicant is the owner of the properties. He also holds 2/3rd of the shares in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. Tvl. SHANMUGA DURAL No. 24/14, RAMANATHAN STREET, T. NAGAR, CHENNAI-600017(hereinafter called the Applicant) are registered under GST with GSTIN33AAQPS8495K1ZO.The applicant has sought Advance Ruling on the following questions: 1. Whether GST liability does arise in respect of property of the partner used by the Partnership Firm to carry out the business by the firm at free of rent? 2. If so, what is the relevant section or rule or provision in GST law under which the partner of the firm is required to pay GST on notional rent? 3. Is it mandatory to execute rental deed between partner and Partnership firm, when there is no furtherance of business for that partner? 4. What is the applicable valuation rule, when consideration is not fixed and not received by the Partner? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if so, what should be the 'Value to be adopted'. He stated that the owner has more than seven properties, the properties are used as godowns and retail shops and the owner is the Managing Director of the partnership firm. He stated that since no rent is collected, it is not accounted. The applicant was asked to give the following documents in a weeks' time. i. Details of the places in relation to which Ruling is sought ii. Details of activities carried on in such places iii. Details of EB, water charges in respect of such places iv. Copy of P L statement and Balance sheet for two years v. Copy of partnership deed 3.2 The applicant vide their letter dated 15.12.2021 submitted the following facts: Details of the places in relation to which advance ruling is sought and the activities carried on each place: Details of EB Charges and water taxes paid for each places: No.7/10,12,13, Ranganathan street, T.Nagar, Chennai-17 Household Utensils showroom for own firm No.17/3,174, Ranganathan street, T.Nagar, Chennai-17 Textile Showroom for own Firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the properties used by such staffs. Copy of Partnership Deed: It is submitted that the Firm was started in the year 1976 and there were lot of Reconstitution Deeds from the inception till 30th September,2015. The Final Reconstitution Deed was executed on 1st of October-2015 which has been furnished and it is the final one during the relevant period. 4. The Centre Jurisdictional authority who has administrative control over the applicant has stated that there are no pending proceedings on the issue raised by the applicant in the Advance Ruling application and has submitted the following comments on the issue raised in the application. According to Section 7 (1) (a) of CGST Act, 2017 the expression Supply, includes all forms of supply of Goods or Services or both, such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Lease includes Tenancy, Premium, Rights to use, etc. Hence, renting out of immovable property for business is to be treated as supply of service as per section 7(1)(a) ibid. In the case on hand, the immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rry out the business by the firm at free of rent? 2. If so, what is the relevant section or rule or provision in GST law under which the partner of the firm is required to pay GST on notional rent? 3. Is it mandatory to execute rental deed between partner and Partnership firm, when there is no furtherance of business for that partner? 4. What is the applicable valuation rule, when consideration is not fixed and not received by the Partner? On perusal of the questions, it is seen that Question 1, 2 4 requires ruling/clarification as to whether GST liability arises in respect of the property of the partner when used by the partnership firm free of rent/ on notional rent as per the applicable valuation rules which are falling under the ambit of Section 97(2) of the GST Act and are hence admitted and taken up for consideration on merits. Question, No.3 seeking clarification about execution of rental deed is procedural and that part of the question is not answered. However the later part of the question seeking clarification on whether such renting is in furtherance of business for the applicant is taken up for consideration. Thus the questions taken up for consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm along with his wife, is used for the businesses of the partnership firm, in which the applicant is the Managing Partner and the details of and the activities carried on in such properties is as follows:- Address of the properties Activities carried on No.7/10,12,13, Ranganathan street, T.Nagar, Chennai-17 Household Utensils showroom for own firm No.17/3,174, Ranganathan street, T.Nagar, Chennai-17 Textile Showroom for own Firm No.25/12,RamanathanStreet, T.Nagar, Chennai-17 Furniture Home Appliances showroom for own firm No.8/2,Ramanathan Street, T.Nagar, Chennai-17 Godown / warehouse for home appliances for own firm No.4, Madley Road, T.Nagar, Chennai-17 Furniture Home Appliances Showroom own firm No.164/6, North Usman Road, T.Nagar, Chennai 47 Home Appliances Showroom for own firm No.122/ 75, GN Chetty Road, T.Nagar, Chennai-17 Furniture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial use to the partnership firm which is a separate person. 8.1 To decide on the liability of renting and whether it amounts to supply under the GST law, relevant legal provisions may be analysed as follows:- * Section 7. Scope of supply.- (1) For the purposes of this Act, the expression - supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; The property of the individual being rented out to the partnership firm is a supply' under the GST Act. However when consideration for such renting is considered, Schedule I of the CGST Act,2017 stipulates as below: SCHEDULE I. [ See section 7] ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION (1) Permanent transfer or disposal of business assets where input tax credit has been availed on such assets. (2) Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has been charged in actuality. Thus the rent free accommodation proposed to be provided by the applicant to the partnership firm in which he is major shareholding partner and Managing Partner is. a supply without consideration in the course of and furtherance of business and is found taxable under Section7(1)(a) read with Schedule I of the CGST Act,2017. 9. Now we take up the question of applicable valuation provisions when consideration is said to have not been fixed and received. The relevant legal provisions are examined as under:- Section 15. Value of Taxable Supply.- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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