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Most companies and hotels pay GST at 18% on lease rentals and claim credit to reduce their tax outgo. Also in many instances the leased properties are treated as owned ones and the rights are transferred when the property is sold or bought by new owners.

In what could impact several companies and hotels, an Appellate Authority for Advance Ruling (AAAR) has denied input tax credit under the Goods and Services Tax (GST) framework on leasing of land and property.

Most companies and hotels pay GST at 18% on lease rentals and claim credit to reduce their tax outgo. Also in many instances the leased properties are treated as owned ones and the rights are transferred when the property is sold or bought by new owners.

The Tamil Nadu AAAR denied the input tax credit to Inox Air Products, a medical gas manufacturer, on leasehold rights acquired for air-separation-unit construction.

The ruling could result in additional scrutiny and notices for several companies and even hotels that work on lease models, say tax experts.

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