Person letting out property on rent is eligible to take Credit of tax charged in respect of brokerage services [AAR]

Authority of Advance Ruling Tamil Nadu in matter of Adwitya Spaces (P.) Ltd. -Person letting out property on rent is eligible to take Input Tax Credit of tax charged by broker in respect of brokerage services

1. Query

Whether applicant is eligible to take Input Tax Credit of the CGST & SGST charged by M/s Catalyst Consulting Chennai in respect of brokerage services and adjust the same against output tax payable against Renting of immovable property.

2. Facts

Applicant is in the business of letting out property and is in the receipt of rental income. They have let out one of their properties and letting out has been arranged by a property consultant who is registered under GST. Property Consultant raised their bill for their services to the applicant.

3. Contention of the Applicant

Applicant has contended that tax of CGST & SGST paid by them on brokerage charges falls under “input tax” under Section 2(62) of CGST Act and is not covered under any restrictions under Section 17(5)(c) or (d) and hence are eligible to take input tax credit.

4. Observation by AAR

Applicant has received an inward supply of real estate brokerage services for renting of property on a fee basis. Due to the services of Catalyst Consulting Chennai, the applicant was able to make an outward supply of renting of the property. Hence, this inward supply was used in the course of the applicants business. This inward supply is not listed in any of the exceptions mentioned in Section 17(5) of CGST Act/ SGST Act for availing the input tax credit of CGST and SGST.

5. Held

Applicant eligible to take credit of the CGST & SGST charged by M/s. Catalyst Consulting in the Tax invoice No. C-007/17-18 dated 20-Dec-17 raised on the applicant for real estate brokerage services for renting of property on a fee basis rendered by Catalyst Consulting, subject to the conditions as per Sections 16, 17 and 18 of CGST & SGST Act.

6. Comment

The Judgement clarifies that a person giving his property on rent is eligible to claim Input Tax Credit against the output tax in the manner similar to other taxpayers subject to the conditions of Section 16, 17 and 18 of CGST Act, 2017. Thus, in the similar manner, he can claim Input Tax Credit of Repairs and Maintenance and other expenses incurred in the course of renting of immovable property.

It is worthwhile that the copy of the order of Orissa High Court in the matter of Safari Retreats Private Limited Vs Commissioner of CGST & Others WP(C)/20463/2018 is awaited which might further expand the ambit of availability of Input Tax Credit against Renting of Immovable Property.

Person letting out property on rent is eligible to take Credit of tax charged in respect of brokerage services [AAR]