Page 17 - Chapter 2.cdr

consideration will not be treated as supply of service even if it is in the course of CCP 02.15.39.00
Mr. Happy has a huge residential property located at a prime location in
business, since Mr. Raj is not dependent on Mr. Sagar he will not be considered
related party. Mumbai, Maharashtra. He has let out the 1st and 2nd floor to Mr. Peace for CH 2
residential purposes in April. Mr. Peace surrenders his tenancy rights to Mr.
CCP 02.14.37.00 Serene for a tenancy premium of ` 10,00,000 on 1st June. Mr. Serene has also paid
ABC Associate received legal consultancy services from its head office located in the applicable stamp duty and registration charges on transfer of tenancy

Malaysia. The head office has rendered such services free of cost to its branch rights. Moreover, Mr. Serene has agreed to pay a monthly rent of ` 1,00,000 to Mr.
office, does it qualify the supply? Happy from June.
Answer: Yes, As per para 4 of Schedule -I import of services by person from any of Determine the taxability of the transaction(s) involved in the given case, for
his other establishment outside India in the course or furtherance of business the month of June. [ICAI Material] Charge of Tax & Concept of Supply
without consideration would be treated as supply. Answer- Circular No. 44/2018 CT dated 02.05.2018 clarifies that the activity of

Since ABC Associates and the branch office are related persons (as per explanation transfer of tenancy right against consideration [i.e. tenancy premium] is squarely
to sec 8 of IGST Act), services received by ABC Associates will qualify as supply even covered under supply of service liable to GST.
though the head office has not charged anything from it. It is a form of lease or renting of property and such activity is specifically
declared to be a service in Schedule II i.e. any lease, tenancy, easement, licence to
15. Section 7(1A) & 7(3)- Activities or transactions to be treated as
occupy land is a supply of services.
supply of goods or supply of services (Classification as ‘supply of
goods’ or ‘supply of services’) read with schedule II Although stamp duty and registration charges have been levied on such transfer of
CCP 02.15.38.00 tenancy rights, it shall be still subject to GST. Merely because a transaction/supply
Is it important to distinguish between supply of goods and services? involves execution of documents which may require registration and payment of
Answer:- Yes. The CGST Act, 2017 specifies certain provisions separately for supply registration fee and stamp duty, would not preclude them from the ‘scope of supply’

of goods and supply of services viz., and from payment of GST.
Section 12 and Section 13 provides for ascertaining time of supply of goods and time The transfer of tenancy rights cannot be treated as sale of land/ building in Schedule
of supply of services respectively; III. Thus, it is not a non-supply under GST and consequently, a consideration for the
similarly separate provisions have been specified for ascertaining place of said activity shall attract levy of GST.
supply of goods and place of supply of services. Services provided by outgoing tenant by way of surrendering the tenancy rights
Further, the rate of tax applicable to supply of goods and supply of services may be against consideration in the form of a portion of tenancy premium is liable to GST.

different. Accordingly, it is important to distinguish whether a particular transaction Hence, in the given case, the tenancy premium of ` 10,00,000 received by Mr.
involves supply of goods or supply of services. Peace for surrendering his tenancy rights to Mr. Serene is liable to GST.
The circular further clarifies that since renting of residential dwelling for use as
a residence is exempt [Entry 12 of Notification No. 12/2017 CT ® dated 28.06.201732],

CA VISHAL BHATTAD 09850850800 www.vsmartacademy.com V’Smart Academy 25
CA Final GST Questioner