Do you know? In Uttar Pradesh, Stamp Duty on lease agreements for a period not exceeding 5 years (1 year to 5 years) is calculated either as the duty of conveyance for a consideration equal to three times the amount or value of the average annual rent reserved? And Authorities asked to include GST payable on Rent for calculation of Stamp Duty payment? Yes, you read correctly, kindly read this Article carefully and thank me later!
As we know that the stamp duties are taxes on transactions in the shape of stamps on instruments. The primary objectives of the Stamp Duty are to generate revenue for the Government and provide legal authenticity to the documents. Instruments or documents properly stamped are legally recognized and can be presented as evidence in court proceedings. Leasing property has its own economic advantages to the businesses and business house, and commercial people prefer holding property on lease basis. The instrument by which lease hold rights are acquired needs to be stamped under the Indian Stamp Act, 1899 or any state specific legislations like Maharashtra Stamp Act
In this article, we focus on the Uttar Pradesh, particularly with regard to stamp duty on lease agreements. The applicable rates of stamp duty are provided in the Schedule to the Indian Stamp Act as applicable in the State of Uttar Pradesh. Earlier State of Uttar Pradesh has enacted Uttar Pradesh Stamp Act, 2008, however, same was repealed by the Uttar Pradesh Stamp (Repeal) Act, 2019. Therefore, it is the Indian Stamp Act, 1899 which is governing the Stamp Duty Rates in the State of Uttar Pradesh.
It is Article 35 which deals with the stamp duty payable on leases, with the rate varying based on the duration of the lease. In the present article/blog, it is not the rate of stamp duty which are under consideration, it is inclusion of GST payable on rent for calculation of Stamp Duty is under consideration. Therefore, a natural question does arise as to whether the GST payable by the lessee on the rent amount should also form part of the rent for Stamp Duty calculation. Is it correct legal view? Let’s consider this with an example:
Say Monthly Rent: Rs.1,00,000
GST @18%: Rs.18,000
Total Payment by Lessee: Rs.1,18,000 per month
Lease duration: 3 Years
Now let’s see the implication of stamp duty, in case GST is included and excluded:
Included:
• Whole amount payable is Rs.42,48,000/- (Rs.1,18,000 x 36 Months)
• Presume Stamp Duty is 2% of Rs.42,48,000/- = Rs.84,960/-
Excluded:
• Whole amount payable is Rs.36,00,000/- (Rs.1,00,000 x 36 Months)
• 2% of Rs.36,00,000/- = Rs.72,000/-
{Note: 2% is just taken for calculation purposes, it is not actual duty)
So, there is a difference of Rs.12,960/- in both the calculations which can amplify if the rent is huge and period is longer. Generally, it is in common parlance that a tax cannot be imposed on statutory dues, as statutory dues themselves are obligations imposed by law and not part of the taxable consideration. In this context, it is relevant to peruse, Explanation 1 to Article 35 of the Indian Stamp Act, 1899 (as applicable) which provides as follows:
“(1) When a lessee undertakes to pay any recurring charge, such as Government revenue, the landlord’s share of cesses or the owner’s share of municipal rates or taxes which is by law recoverable from the lessor, the amount so agreed to be paid by the lessee shall be deemed to be part of the rent.”
A plain reading of the explanation makes it clear that if the lessee agrees to pay government revenue, cess, or municipal taxes which are otherwise payable by the lessor, such amounts will be considered part of the rent for the purpose of calculating Stamp Duty, however, GST, on other hand, is a transaction based tax and is applicable on the provision of service of leasing and not on the property itself or cannot be read as a charge on the property. It is also relevant to state that it is not the liability of the owner/lessor which lessee agrees to assume, rather, it is a legal obligation in terms of the GST Law which arises due to the taxable transaction. GST is an indirect tax, which means the actual tax burden is borne by the end consumer means service recipient or consumer, however the responsibility to collect and remit to the government treasury is fastened on the service provider (i.e. landowner). Only because the landowner is liable to remit GST collected will not make such tax recoverable from the lessor.
It is also relevant to note here that inclusion of GST on rent amount came up for a consideration in the State of Tamil Nadu wherein Tamil Nadu government obtained a written opinion from the Advocate General of the State who opined that the GST payable by the lessee cannot be treated as part of the rent for the purpose of chargeability of Stamp Duty under the Indian Stamp Act, 1899 and position was clarified by the Government by issuing a Circular No.16125/C2/2019 dated 16.04.2019 which is available on https://tnreginet.gov.in/portal/ as of 22.08.2025.
In view of the above, GST cannot be considered a part of the rent for the purpose of calculating Stamp Duty. It should not be included as part of the rent, as it is not a liability of the Lessor that the Lessee is discharging. Rather, it is a separate tax applicable on the service provided by the Lessor to the Lessee.
