No GST on interest-free security deposit received by the lessor which are refundable on completion of lease tenure
Authority for Advance Rulings, Maharashtra E-Square Leisure (P.) Ltd., In re - 104 taxmann.com 258 (AAR – MAHARASHTRA)
The Applicant is engaged in renting of immovable property to business entities for commercial purpose. It is discharging GST liability on rent received from lessee. It has taken interest free security deposit from the lessees as security against damage to property. It filed an application for advance ruling to determine the applicability of GST on interest free security deposit. The Authority for Advance Rulings, Maharashtra observed that the security deposit taken by the applicant is to secure or to act as a guarantee as per agreement against damage to property. The applicant in addition to rent also collected interest free security deposit from its lessee which is returnable on completion of lease tenure. Since the entire amount is to be returned back to the lessee, such deposits cannot be considered as part of rent and will not be liable to tax. However, at the time of completion of lease tenure, if the entire deposit or its part is withheld and not paid back, then such amount will be liable to GST. The Authority for Advance Rulings, Maharashtra held that no GST would be applicable on interest-free security deposit received by the lessor as it is refundable on completion of lease tenure.