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Commercial real estate developers have to pay GST, even if rent is not realised, experts say

Experts say that commercial developers may re-negotiate their rents if their contract permits it, and then pay GST on lower rents

Commercial real estate developers have to pay Goods and Services Tax (GST) of 18% on rent, even if it is not realised during the current COVID-19 lockdown, as per norms.

Commercial malls have not been functioning in the State, since the lockdown was imposed towards the end of March. While “If the invoice is raised for rent, then GST has to be paid, even if the rent is not realised. What the commercial developers can do in the current situation, is that if their contract permits, they can re-negotiate the rents and pay the GST on lower rent,” according to Abhishek Jain, tax partner at EY, an auditing firm.

“In a situation where the rental obligations remain unchanged and it is only a case of the tenant refusing to pay or simply being in default, it would not be possible for the landowner to contend that GST is not payable,” K. Vaitheeswaran, advocate and tax consultant said. He pointed out that it is also a matter of irony that when the rentals are not realized, GST is still payable.

“Taking into account the plight of various property owners who are struggling post COVID-19, the only solution is for the government to step in to relax the norm, which enables GST to be made payable on rent received or realised as against accrual,” Mr. Vaitheeswaran said.

R.R. Aroonkumar, who has expertise in commercial real estate, said that the norm of GST to be paid on accruals is being to put to the test in the current situation. He pointed out that retailers who have strong bargaining power have been re-negotiating for lower rentals.

Some of the mall operators in Chennai who spoke on condition of anonymity said GST is one of the issues they are facing, along with levy of fixed electricity charges by Tangedco.

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Printable version | Jul 6, 2020 11:54:39 AM | https://www.thehindu.com/business/commercial-real-estate-developers-have-to-pay-gst-even-if-rent-is-not-realised-experts-say/article31960338.ece

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