Page 28 - GSTL_13th August 2020_Vol 39_Part 2

J36 GST LAW TIMES [ Vol. 39

RENT ON COMMERCIAL PREMISES DURING LOCKDOWN — GST IMPLICATION
RENT ON COMMERCIAL PREMISES
DURING LOCKDOWN — GST IMPLICA-
TION
RENT ON COMMERCIAL PREMISES DURING LOCKDOWN — GST IMPLICATION
By
Debasish Bandyopadhyay, B.Com., LL.B., PGDFM

The outbreak of COVID-19 and consequent lock-
down across the country has unleashed an unprecedented
damage to the Indian business eco-system. In the ongoing
economic circumstances, the issue of high rent has been
making business unviable amid subdued demand in the retail sectors across the
country. Business in non-essential items have ceased operations and many ten-
ants find leased premises inaccessible for monetary reasons during the relevant
period. In the aforesaid background, the larger question or the issue is the liabil-
ity to pay rent during lockdown period and GST implication thereof. Many re-
tailers across the country have been negotiating with the landlords or mall man-
agements over waiver of rent or at least partial waiver of rent for the lockdown
phase. It has been reported that effective negotiation has been worked out on the
mutually agreed terms for rearrangements of rent by the lessor and lessee in
many cases. On the other hand, apprehension has loomed over the trade on the
applicability of GST liability on such ongoing rental arrangement or rearrange-
ment whatsoever. This article discusses the implication of GST on rent during the
lockdown period.
Premises for commercial activity are leased through the execution of con-
tract or agreement between landlord and tenant. During the lockdown period,
the stated purpose of contract, conducting business, becomes an impossibility
w.e.f. 23-3-2020. Now, the issue that is trending across the country is, what
would be the GST implication on such rental contracts in the event of a mutual
agreement to waive of rent for the lockdown period. At this point, it is important
to examine the said rental agreement in the light of Indian Contract Act, 1872.
It is pertinent to note that in terms of Section 2(g) of the Indian Contract
Act, any agreement not enforceable by law is considered to be void. Whereas,
any agreement which is enforceable by law at the option of one or more parties
involved thereto, but not at the option of the other, is a voidable contract as per
Section 2(i) of the said Act. Moreover, it is important to highlight that in terms of
Section 56 of the Act, a contract becomes impossible or unlawful if after its execu-
tion due to the circumstances beyond control of either party, it is void. For the
sake of present discussion, the said Section 56 of the Indian Contract Act is ex-
tracted below;
“Agreement to do impossible act
An agreement to do an act impossible in itself is void.
Contract to do act afterwards becoming impossible or unlawful : A contract to
do an act which, after the contract is made, becomes impossible or, by reason of some
event which the promisor could not prevent, unlawful, becomes void when the act be-
comes impossible or unlawful.

GST LAW TIMES  13th August 2020  28