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Unpaid Rent and GST application

Arindam Das (AUDIT ASSITANT) (27 Points)

05 March 2024

Court Order to the Tenant to Pay the Rent Dues for 10 months to the Owner of Rs.20 lacs. But in the Court Order nothing mentioned relating GST on such Rent. Tenant Paid a adhoc amount to the owner Rs.13.50 lacs.

Until the Order pass by the Court, Owner did not recognize the rent as income and did not pay any GST on such rent as the case was pending before Court.

In Rent Agreement it is clearly written that monthly Rent is Rs. 2 lacs + GST 18% ( Rs 2.36 lacs - for 10month is Rs. 23.60 lacs)

what should owner do.

i) considered it as Rs.13.5 lacs inclusive of GST? and what would be the Accounting treatment.

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2 Replies

sabyasachi mukherjee (27574 Points)
Replied 05 March 2024

If property hired for Business purpose no issues.
deduct tds, and pay. owner will furnish tds certificate

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Money Money (413 Points)
Replied 05 March 2024

The situation you’ve described involves unpaid rent, a court order, and the question of GST (Goods and Services Tax) on the rent amount. Let’s break it down:

Court Order and Unpaid Rent:
The court has ordered the tenant to pay rent dues for 10 months to the owner, totaling Rs. 20 lakhs.
The tenant has already paid an ad-hoc amount of Rs. 13.50 lakhs.
GST on Rent:
The rent agreement specifies a monthly rent of Rs. 2 lakhs plus GST at 18% (which amounts to Rs. 2.36 lakhs per month).
However, the court order does not explicitly mention GST.
Owner’s Dilemma:
The owner did not recognize the rent as income until the court order was passed.
The case was pending before the court, so no GST was paid during this period.
Options for the Owner:
The owner has a few options regarding the accounting treatment: a) Consider It as Rs. 13.5 Lakhs Inclusive of GST:
The owner can treat the Rs. 13.50 lakhs received from the tenant as inclusive of GST.
In this case, the GST liability would be considered settled with the payment.
The accounting treatment would involve recognizing the entire amount (Rs. 13.50 lakhs) as rental income without separately accounting for GST.
b) Account for GST Separately:
Alternatively, the owner can account for GST separately.
Since the rent agreement specifies GST at 18%, the owner should calculate the GST amount for the 10 months (Rs. 23.60 lakhs) and recognize it as a liability.
The Rs. 13.50 lakhs received from the tenant would be considered as rent, and the GST liability (Rs. 23.60 lakhs) would be recorded separately.
Accounting Treatment:
If the owner chooses option (a), the accounting entry would be:
Debit: Rent Receivable (Rs. 13.50 lakhs)
Credit: Rental Income (Rs. 13.50 lakhs)
If the owner chooses option (b), the accounting entry would be:
Debit: Rent Receivable (Rs. 13.50 lakhs)
Credit: Rental Income (Rs. 13.50 lakhs)
Credit: GST Payable (Rs. 23.60 lakhs)
Consult a Professional:
Given the legal and financial complexities, I recommend that the owner consults a qualified accountant or tax advisor.
They can provide personalized advice based on the specific circumstances and ensure compliance with GST regulations.