Gst on rent of commercial building

This query is : Resolved

arup (Querist)
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24 August 2017 Hi Team,

I have a question.

Suppose we have an office situated in a building where we are paying INR 1,25 lakh p.m i.e.INR 15 lakh P.A.In the same building there are other several offices for which the owner get approx 4 times INR 1.25 lakh per month=INR 60lakh p.a.

Previously the owner didn't tell us about charging GST. Now he is saying to give 18% of GST over 1.25lakh i.e.1.47lakh.

Now the question is as per the rule 18% gst levied if the rental income is more than INR 20lakh.Its ok as per owners side.However how can we claim the refund for the same after the end of FY.

Please share your valuable suggestions.

Thanks,
Arup Patnaik

Anand

Anand (Expert)
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24 August 2017 The GST paid by you to the landlord can be set-off as Input Tax Credit against your output tax liability of GST. I do not think that you can claim a refund. It can only be used to offset your liability, if any.

Rakesh Mishra

Rakesh Mishra (Expert)
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24 August 2017 Yes, Mr Anand is absolutely correct, you can avail ITC but in no case claim refund

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arup

arup (Querist)
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24 August 2017 Thanks Mr Anand & Mr Rakesh.However if a company provides consultancy service to a US Client ,how can input Tax credit get set off.Our core business is to provide service to US CLINT and we are receiving income in foreign exchange.As export of service is free from GST (if I m not wrong) how can we set off GST.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 You’re correct that the export of services is generally treated as a supply of goods or services that is exempt from GST under Indian GST law. However, the process for setting off Input Tax Credit (ITC) on inputs used to provide such export services involves a few specific steps. Here’s a detailed guide on how to handle ITC in the context of providing consultancy services to a US client:

### **1. **Understanding the Tax Treatment**

**A. **Export of Services:**

- **Zero-Rated Supply:** Export of services is classified as a zero-rated supply under GST, which means that while the supply itself is subject to 0% GST, you can claim a refund of the input taxes paid on inputs and input services used to provide the exported services.

### **2. **Claiming Input Tax Credit (ITC)**

**A. **Eligibility to Claim ITC:**

- **ITC on Inputs and Input Services:** You are eligible to claim ITC on the GST paid for inputs and input services used to provide export services. This includes office supplies, professional services, utilities, etc., used in the course of providing consultancy services to a US client.

**B. **Steps to Claim ITC:**

1. **Accumulate ITC:**
- Ensure that all GST invoices for inputs and input services are correctly recorded in your accounts and that you have valid tax invoices for claiming ITC.

2. **File GST Returns:**
- **GSTR-3B:** Report the total ITC claimed in your GSTR-3B return. Ensure that the details of the ITC are accurately reflected in the appropriate sections of the return.
- **GSTR-1:** Report the export of services in your GSTR-1 return, indicating that the supply is zero-rated. Ensure to mention the GSTIN of the recipient (if available) and other required details.

3. **Claim a Refund:**
- **Application for Refund:** Since export of services is a zero-rated supply, you can claim a refund of the ITC on inputs and input services. File an application for a refund of the unutilized ITC under GST using the **FORM RFD-01**.
- **Supporting Documents:** Provide all necessary documentation such as invoices, export invoices, shipping bills, proof of receipt of foreign exchange, etc., along with the refund application.

### **3. **Procedure for Refund of ITC:**

**A. **Filing Refund Application:**

- **FORM RFD-01:** Complete the refund application form. This includes detailing the ITC you are claiming back, the export invoices, and other relevant information.

- **Submission:** Submit the refund application on the GST portal. Ensure all details are correctly filled and supporting documents are uploaded.

**B. **Refund Process:**

- **Processing:** The refund application will be processed by the GST authorities. They will verify the details and supporting documents before approving the refund.

- **Refund Amount:** Upon approval, the GST authorities will refund the claimed amount either through a credit to your GST ledger or by direct payment.

### **4. **Record-Keeping and Compliance**

- **Maintain Documentation:** Keep meticulous records of all GST invoices, export invoices, proof of receipt of foreign exchange, and any correspondence with GST authorities regarding refunds.

- **Compliance:** Ensure compliance with all GST requirements related to export of services and ITC claims to avoid any issues during audits or refund processing.

### **Summary**

1. **Export of Services:** Treated as a zero-rated supply; you are eligible to claim a refund of ITC on inputs and input services used.
2. **Claiming ITC:** Accumulate ITC, report it in GSTR-3B, and file a refund application in FORM RFD-01.
3. **Refund Process:** Follow the procedure for refund application, ensure all documents are in order, and maintain proper records for compliance.

**References:**

- **Section 16 of the CGST Act, 2017:** Provides the eligibility and conditions for claiming ITC.
- **Section 16(3) of the CGST Act, 2017:** Pertains to claiming ITC on inputs used for export of services.
- **Notification No. 41/2017-Central Tax (Rate):** Details the zero-rated supply provisions.

For specific advice and to ensure accurate compliance, consulting with a GST professional or tax advisor is recommended.