The West Bengal Authority of Advance Ruling (AAR) has ruled that Goods and Service Tax (GST) is payable on reimbursement of municipal property tax by lessee/occupier.
The bench of Dr Tanisha Dutta and Joyjit Banik has observed that the municipal property tax levied under the Kolkata Municipal Corporation Act, 1980, being a tax other than the CGST Act/ WBGST Act/ UTGST Act/ GST (Compensation to States) Act shall therefore form a part of the value of supply on which GST will be levied.
The applicant, Kolay Properties Ltd has entered into a lease agreement with Andhra Bank, Munshi bazar Branch, Kolkata (Lessee/Occupier) to let out an area on the first floor of leased premises to use the leased premises for locating the Bank’s Munshi Bazar Branch for carrying out banking business only.
The applicant states that effective from 1st April, 2020, Andhra Bank and Corporation Bank were amalgamated into Union Bank of India in pursuance of an amalgamation scheme notified by the Central Government vide gazette notification dated 4th March, 2020.
The applicant sought the advance ruling on the issue whether GST is applicable on reimbursement of municipal property tax by the lessee/occupier.
The applicant argued that ‘Transaction value’ is the lease rent which is the price actually paid or payable by the lessee/occupier to the applicant for the supply of lease services; that the applicant and the lessee/occupier are not related and price i.e. lease rent is the sole consideration for the supply. Hence, the value of supply of such lease service is the lease rent.
The applicant contended that the property tax charged by KMC is a tax levied under “The Kolkata Municipal Corporation Act, 1980” which is a law other than the CGST Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act and hence falls within the ambit of section 15(2)(a) of the CGST Act.
The AAR held that the value of supply would be inclusive of municipal property tax and tax under the GST Act is payable on such value.
Ruling Details
Applicant Name: Kolay Properties Ltd
Date: 27/02/2025
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