Is GST Leviable on Notional Interest on Security Deposit of Rent?

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As a business owner or startup founder, the issue of GST leviable on notional interest on security deposit of rent may have crossed your mind. This is a common issue that many business owners and startup founders in India face. In this article, we will explore the topic of whether or not GST is leviable on notional interest on security deposit of rent.

Background

Before we dive into the topic of GST on notional interest on security deposit of rent, let's first understand what a security deposit is. A security deposit is a sum of money paid in advance by a tenant to a landlord or owner of a property. This amount is held by the landlord or owner as security against any damage caused to the property or in case the tenant fails to pay rent or vacate the property after the term of the lease is over.

Now, let's talk about notional interest. When a landlord or owner holds a security deposit, they are also holding on to the right to use that money for their own purposes. This means that they could invest the money and earn interest on it. Notional interest is the amount of interest that the landlord or owner could have earned on the security deposit if they had invested it.

Is GST leviable on notional interest on security deposit of rent?

The short answer is no. As per the GST law, notional interest on security deposit is not considered as a supply of goods or services. Therefore, it is not subject to GST.

However, there are a few things to keep in mind. Firstly, if the landlord or owner actually earns interest on the security deposit, then that interest will be subject to GST as it will be considered as a supply of services. Secondly, if the landlord or owner charges any other fees or charges related to the security deposit, such as administrative charges or processing fees, then those charges will be subject to GST.

Conclusion

In conclusion, GST is not leviable on notional interest on security deposit of rent. However, it is important to keep in mind that any actual interest earned on the security deposit or any other charges related to the security deposit will be subject to GST.