Tiruppur Protests Against Rent GST and Property Tax Increases

Business Standstill in Tiruppur as Traders Protest GST and Property Tax Hikes

TIRUPPUR: Business activity ground to a halt in Tiruppur district as traders, shop owners, and industrial units participated in a bandh on Wednesday, closing their establishments from 6 am to 6 pm. The protest was aimed at condemning the union government’s decision to impose an 18% GST on rent for commercial buildings and the state government’s recent increase in property tax.

The All Trader’s Federation reported that approximately one lakh shops across the district remained closed, resulting in an estimated loss of Rs 100 crore in trade due to the shutdown. Most shops, hotels, small business establishments, and commercial entities in the city and its suburbs were shuttered. The Khaderpet area, known as the hub for the knitwear trade in Tiruppur, was notably deserted, and around 300 vegetable shops were also closed for the day.

The Tiruppur Exporters and Manufacturers Association (TEAMA) endorsed the bandh, and all members refrained from operating their factories. KGM Duraisamy, the president of the All Traders and Small Business Associations Federation, voiced concerns about the implications of the new taxes. The central government has imposed 18% GST on rent for commercial buildings. This will lead to increased rental costs, which will in turn affect most shops and small businesses that operate out of rented premises. Consequently, they will pass on these price increases to consumers,” he stated.

Furthermore, Duraisamy criticized the drastic increases in property tax under the current government, highlighting that while there were no tax hikes during the decade of AIADMK rule, the DMK government has increased property tax by 100% since taking office, with an additional 6% annual increase announced recently. He noted, “Power tariffs and garbage taxes have also gone up,” adding that the property tax rates in Tiruppur Corporation are significantly higher than those in Coimbatore Corporation.

The disparity in property tax rates, even for buildings located on the same road, has further compounded the challenges faced by traders and small business owners. In response to these mounting issues, the protest was organized to capture the attention of both the central and state governments regarding the GST on building rent and property tax hikes. The bandh received support from DMK alliance parties, including the AIADMK, as well as various industry associations.

“We called for a complete shutdown to highlight our grievances regarding GST on building rent and property tax increases, demanding their repeal. At least one lakh shops remained closed, leading to a trade loss of Rs 100 crore. The central and state governments need to address our concerns. If they fail to do so, we will intensify our protests,” Duraisamy warned.

Commercial property rent now under RCM

COMMERCIAL PROPERTY RENTALS NOW UNDER RCM

The Goods and Services Tax (GST) Council at its 54th meeting also clarified on the tax treatment of preferential location charges. 

The Goods and Services Tax (GST) Council at its 54th meeting in New Delhi on September 9 decided to bring renting of commercial property by an unregistered person to a registered person under Reverse Charge Mechanism (RCM), in order to prevent revenue leakage.

The GST Council also decided that commercial property will now come under the reverse charge mechanism. Under the RCM, the liability to pay GST will now shift from the supplier, that is the landlord, to the recipient or the tenant of the commercial rental services.

Clarifies on tax treatment of preferential location charges

The GST Council also clarified on the tax treatment of preferential location charges stating that the PLC paid along with the price for property construction forms a part of the same supply, ie, construction services and hence should be liable at the same rate at which construction services are taxed.

The latest change announced by the Goods and Services Tax (GST) Council regarding taxing rental income from commercial property is likely to improve the government’s tax revenue. But, this may prove costly for tenants, according to industry experts. Renting commercial property owned by a person not registered with the GST Authority has been brought under the reverse charge mechanism (RCM), according to an announcement made on September 9 after the Council’s 54th meeting. This would mean that the commercial tenant will have to deposit the GST.

Earlier, no GST was applicable in such cases. If the landlord was a registered entity, they were liable to pay GST at 18 per cent. It was also the case when a residential property was being used for commercial purposes

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