GST Treatment On Security Deposit

Security deposit is generally given to client for getting tender / work etc. Security deposit paid by customer to client in various forms like Bank guarantee etc. Its important to note that Security deposit is a Deposit. Which is utilized by supplier only at occurrence of contingent event. If such event does not happen the amount is refundable. Hence its important to understand GST Treatment on Security Deposit. As per Section 13 of CGST Act works contactor need to be pay gst on entire amount of invoice. Where as Deposit is not part of invoice. Hence there will be no GST on Security Deposit. There is no GST Payable on Security Deposit.

For Example : M/s ABC Ltd doing Furniture repairs work for M/s PQR Ltd at Rs. 50 lac Plus Applicable GST.

And term is that M/s ABC will given deposit of 5 lac to M/s PQR Ltd.

Read About GST Return Filing

GST Treatment on Security Deposit Money Supplier (Ms ABC Ltd )

• Issue invoice of Rs. 50 lac Plus GST to customer
• Pay GST on Full amount of invoice ( GST on 50 Lac )
• File GSTR 1
• File GSTR 3 B
• NO GST on Security Deposit

GST Treatment on Security Deposit Customer ( M/s PQR Ltd )

• Avail GST Credit as per section 16 of CGST Act on invoice
• NO GST on Security Deposit

No GST Credit on Security Deposit  

Its important to not that security deposit if not part of invoice. Hence there will be no GST treatment on deposit amount. Generally this amount is refunded to supplier if any contingent event not occurring.

What is Deposit  ?

Under GST concept meaning of deposit is a sum of money paid by contractor to a developer. And Contractor can utilize same amount on occurrence of certain event. ( like non performance etc. ) If such event does not happen then such amount is refundable.

Summary

Since security deposit are not in nature of consideration and refundable. No GST applicable on security deposit. However if at a event towards the consideration for supply get encashed. Then  same will be taxable at time when deport are appropriated toward consideration.