GST on Increased Rents for Past Periods: Key Ruling
By: Admin
Date: September 20, 2024
Categories: Advance Ruling-New
Reading Time: 4 Min
The Tamil Nadu Authority for Advance Ruling (AAR), in the case of M/s Metropolitan Transport Corporation, In Re [Ruling No. 12/ARA OF 2024 dated June 25, 2024], ruled that GST is applicable on increased rents for past periods, treating it as ‘supply’ under the Central Goods and Services Tax Act, 2017 (CGST Act). If the price of goods or services is revised upwards after the appointed date, a registered person must issue a supplementary invoice or debit note within 30 days.
Case Background:
M/s Metropolitan Transport Corporation (“the Applicant”), a government entity, entered into a lease agreement in March 2007 for renting premises to the Government of Tamil Nadu’s Regional Transport Officer (RTO). The lease was to be revised every three years, but unresolved negotiations delayed the rent revision. In 2023-24, both parties agreed on a 15% rent increase every three years, backdated to September 1, 2005, resulting in a differential amount of ₹1.60 crore.
The Applicant contended that GST should not apply to the increased rent as the invoices pertained to periods before GST was implemented (July 1, 2017). They argued the enhanced rent was subject to Service Tax instead.
Key Issue:
- Is GST applicable on the increased rent for periods prior to GST implementation?
Ruling:
The AAR held that GST is applicable on the increased rent, as it falls under “supply” per Section 142(2)(a) of the CGST Act. According to this provision, price revisions of contracts entered before GST implementation, but revised upwards after, require supplementary invoices within 30 days. Therefore, the increased rent of ₹1,60,42,203/- for the period from September 1, 2005, to August 31, 2022, is subject to GST.
Our Comments:
In line with the ruling in M/s Jaiprakash Associates Limited, In Re [Ruling No. A.R. Com/14/2023 dated May 26, 2023], any amount received due to a price revision for a contract entered into prior to the GST era is deemed a supply under the CGST Act, attracting GST.
Key Takeaways:
- GST is payable on rent increases even for past periods if the revision occurs post-GST implementation.
- Businesses should issue supplementary invoices or debit notes within 30 days of rent revision.
- Section 142(2)(a) of the CGST Act provides a legal framework for dealing with such transitional provisions.
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