GST Payable on Reimbursement of Municipal Property Tax by Lessee / Occupier: AAR [Read Order]

In a ruling related, the West Bengal Authority For Advance Ruling Goods and Services Tax (AAR) has held that Goods and Service Tax (GST) is payable on  reimbursement of municipal property tax by lessee / occupier

Kolay Properties Ltd, the applicant 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 Premises No. 10/2, Beliaghata Road, Kolkata-700015 (“leased premises‟) to use the said leased premises for locating the Bank‟s Munshi Bazar Branch for carrying out banking business only. 

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The applicant stated  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 question before the authority is that whether GST is applicable on reimbursement of municipal property tax by the lessee/occupier? The applicant states that the question raised in the application has neither been decided by nor are pending before any authority under any provision of the GST Act.

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It was submitted that lessee had paid towards 50% of occupier‟s share of property tax spanning period from July „17 to March‟ 20. The process of calculation of property tax in KMC has been changed from previous Annual Rateable Value (ARV) to Unit Assessment System (UAA) and based on this method applicant has raised invoice vide no GST/A/0761/22-23 dated 02.03.2023 which is inclusive of GST  @ 18% of receivable amount from lessee, for period April 2020 to March 2023.

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The only issue pertinent to this case is whether GST is applicable on reimbursement of municipal property tax by the lessee/occupier. In other words, whether the value of supply as determined by the applicant will include the amount paid by him on account of municipal property tax. 

In terms of sub-section (1) of section 9 of the GST Act, tax in levied inter alia on the value determined under section 15 of the said Act. It has already been submitted by the applicant himself that section 15 of the GST Act deals with value of taxable supply. 

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The authority held 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.

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While concluding the two member bench of Dr Tanisha Dutta, Joint Commissioner and Joyjit Banik, Additional Commissioner, SGST held that  value of supply would be inclusive of municipal property tax and tax under the GST Act is payable on such value.

To Read the full text of the Order CLICK HERE

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