Amount paid for early termination of the lease constitutes consideration for the supply

Last updated: 22 January 2024

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The Karnataka Authority for Advance Ruling (AAR) has determined that payments received for the early termination of a sub-lease, before the agreed lock-in period, are considered 'supply' under the CGST Act. These damages are construed as consideration for the supply, making them liable for GST. The services provided are classified under Chapter heading 9972 and are subject to an 18% GST rate.

Court :
AAR, Karnataka

Brief :
The AAR, Karnataka, in the case of M/s.Enzyme Business Centre [Advance Ruling No. DGR 33 of 2023 dated November 16, 2023],held that, the damages received by the Applicant from the tenant towards the termination of the sub-lease before the agreed upon lock-in period as per the sub-lease deed agreements tantamount to supply as per Section 7 of the Central Goods and Service Tax Act, 2017 ("the CGST Act")and the amount received towards damages as per the settlement agreement is to be construed as Consideration for the supply. The services provided by the Applicant are classifiable under Chapter heading 9972 and are liable to GST at the rate of 18%.

Citation :
Advance Ruling No. DGR 33 of 2023 dated November 16, 2023

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1 Year PLAN

1999

(Excl. of GST ₹359)

2 Years PLAN

3499

(Excl. of GST ₹629)

BEST VALUE

3 Years PLAN

4999

(Excl. of GST ₹899)

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Judgement posted by

Bimal Jain

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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