Even after crossing three years from the inception of GST law, some of the taxpayers assume that property tax can be deducted while calculating the taxable value. This post is intended to dispel such incorrect assumption.
SERVICE TAX LAW
Under the Service Tax law, Notification No.29/2012-S.T. dated June 20, 2012 provided exemption by way of deduction of property tax levied and collected by local bodies while calculating the gross value on service of renting of immovable property.
GST LAW
Under the GST law, no such exemption is extended. Similarly, there is no abatement in value either under Section 15 of CGST Act or the rules / notifications thereunder. A query to this effect was posed in re: Midcon Polymers Private Limited to the Authority for Advance Rulings, Karnataka. The Authority, vide Order dated September 16, 2020, held that property taxes and other statutory levies cannot be deducted for arriving at the taxable value of rental income from immovable property.
On the other hand, if property tax is paid by the tenant directly to the local body (or) if the property tax is collected by the property owner from the tenant, it would form part of the taxable value while computing GST liability in the hands of supplier (property owner).
