GST on Security Deposit

By | May 25, 2018
(Last Updated On: May 25, 2018)

GST on Security Deposits

This Video Tutorial will explain the provisions of GST on Security Deposits

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XYZ Ltd. receiving security deposit from customer against supply of gas cylinders.is there any GST implication on it for XYZ?

Comment :

i )If Deposit is refundable – no GST is payable as it is not consideration as per Section 2(31) of CGST Act 2017

ii) if Deposits not refundable : then GST payable if supplier applies such deposit as consideration for supply as per Section 2(31) of CGST Act 2017

Relevant Portion of Section 2(31) of CGST Act 2017 

consideration” in relation to the supply of goods or services or both includes
(a)any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b)the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply

unless the supplier applies such deposit as consideration for the said supply;

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Comment : A deposit, whether refundable or not, given in respect of the supply of goods or services or both shall not be considered as payment made for the supply unless the supplier applies the deposit as consideration for the supply – proviso to section 2(31) of CGST Act.

Normally, term ‘deposit‘ is used when amount is refundable and term ‘advance‘ is used when amount is adjustable (and not refundable).

However, definition of ‘consideration’ envisages non-refundable deposit also.

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