CBIC vide its Circular No.44/18/2018 CGST Dtd 02-05-2018 has clarified that any transfer of tenancy rights or pagadi shall be considered as supply of services and shall be taxable under GST. The stipulated GST rate is 18%. This will be a huge set back for tenants currently living under Pagadi system as they will have to collect GST of 18% from the buyer of such Pagadi and pay it to the
Government. Although exemption will be available if such transfer is for less than Rs.10 lakhs but than is impractical as pagadi fair value is more than Rs.50 Lakh in Maharashtra. Yes the seller will have to register himself under GST and obtain a GSTIN number for even a single transfer and will have to file return within the time stipulated which within 10 day of the subsequent month of the transaction.
Levy of GST will render pagadi system impratical as seller will have to bear the Capital gain tax under Income Tax and buyer will have to bear 18% GST over and above the stamp duty. Further more since under pagadi system 33% of the proceeds by the seller goes to landlord this system will end its natural death post GST.
The circular being a clarification that GST is applicable with retrospective effect from 1st July 2017 on all such transactions.
Government. Although exemption will be available if such transfer is for less than Rs.10 lakhs but than is impractical as pagadi fair value is more than Rs.50 Lakh in Maharashtra. Yes the seller will have to register himself under GST and obtain a GSTIN number for even a single transfer and will have to file return within the time stipulated which within 10 day of the subsequent month of the transaction.
Levy of GST will render pagadi system impratical as seller will have to bear the Capital gain tax under Income Tax and buyer will have to bear 18% GST over and above the stamp duty. Further more since under pagadi system 33% of the proceeds by the seller goes to landlord this system will end its natural death post GST.
The circular being a clarification that GST is applicable with retrospective effect from 1st July 2017 on all such transactions.
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