Page 11 - Chap1 Charge of Tax & Concept of Supply

Ü Lending fee charged from borrowers of securities has the character of consideration and is taxable.
Ü Apart from above, the activities of the intermediaries facilitating lending and borrowing of
securities for commission or fee are also taxable separately.

2 Ü For a transaction to fall within the purview of supply, it must be a supply of either goods or services or
both.
Ü The definitions of “goods” and “services” specifically exclude “securities” from their purview.
Ü Further, 'derivatives' are included in the definition of 'securities' & thus, they are neither goods nor
services and hence, are not liable to GST.
Ü Since future contracts are in the nature of derivatives, these qualify as 'securities' and thus, are not
subject to GST.

Q.15: Mr. Happy has a huge residential property located at a prime location in Mumbai, Maharashtra. He
has let out the 1st and 2nd floor to Mr. Peace for residential purposes in April. Mr. Peace surrenders his
tenancy rights to Mr. Serene for a tenancy premium of ` 10,00,000 on 1st June. Mr. Serene has also paid the
applicable stamp duty and registration charges on transfer of tenancy rights. Moreover, Mr. Serene has
agreed to pay a monthly rent of ` 1,00,000 to Mr. Happy (unregistered under GST) from June.
Determine the taxability of the transaction(s) involved in the given case, for the month of June. [Study Mat]
Answer:- The tenancy premium received by Mr. Peace is liable to GST, while the monthly rent received by Mr.
Happy is exempt.
Legal Provisions:
Taxability of Transfer of Tenancy Rights:
Ü As per CBIC clarification, the transfer of tenancy rights against consideration (tenancy premium) is
considered a supply of service and is liable to GST.
Ü As per Para 2 of Schedule II of CGST Act, lease, tenancy, easement, or license to occupy land is classified
as a supply of services.
Ü The levy of stamp duty and registration charges on such a transfer does not exempt it from GST.
Ü Since the transfer of tenancy rights does not fall under Schedule III (sale of land/building), it is not a non-
supply and is thus taxable under GST.
Taxability of Monthly Rent:
Ü As per CBIC clarification, renting of a residential dwelling for residential use to an unregistered person is
exempt from GST.
Ü The grant of tenancy rights in a residential dwelling for use as residence against tenancy premium or
periodic rent is also exempt when provided to an unregistered person.
Conclusion:
Ü The tenancy premium of ₹10,00,000 received by Mr. Peace for surrendering his tenancy rights to Mr. Serene
is liable to GST.
Ü The monthly rent of ₹1,00,000 received by Mr. Happy from Mr. Serene is exempt from GST.

Q.16: (a) Rudraksh Kapoor, owner of Rudraksh Publishing House, Ghaziabad, U.P., donated some money
to Divyaprakash Charitable Trust in the memory of his late father. The Divyaprakash Charitable Trust
constructed a room in the school run by it from such donation and wrote “Donated by Rudraksh Kapoor
in the memory of his father” on the door of the room so constructed. Examine whether the money
donated by Rudraksh Kapoor is leviable to GST.
(b) In the above question, if Divyaprakash Charitable Trust had written on the door of the room constructed
from the money donated by Rudraksh Kapoor in the school run by it - “Donated by Rudraksh Publishing
House, Ghaziabad, U.P.”, would the given transaction/activity qualify as supply? [Study Mat]
Answer:-
(a) Taxability of Donation by Rudraksh Kapoor:
The donation is not liable to GST as it is a philanthropic contribution without any commercial intent.
Legal Provisions:
Ü As per CBIC clarification, a donation is not taxable if:
Ü It is made to a charitable organization.

V’Smart Academy 1.09 CA Vishal Bhattad 09850850800