Maintenance Charges on Leased Premises: Who Really Gets the ITC?

The question: Who can claim ITC on maintenance?
Key provision: Section 2(93) — "recipient"
The test: Legal liability to pay — not who pays
Safer route: Prospective tripartite agreement

The short version

Under GST, the "recipient" of a service is the person legally liable to pay for it (Section 2(93)) — not necessarily the person who actually pays or uses the facility.
So a tenant paying the developer's maintenance and getting an invoice in its own name does not automatically get ITC — an invoice with your GSTIN is not enough on its own.
If the owner remains contractually liable, the tenant's payment is just payment on the owner's behalf (allowed by Section 2(31)) — and the ITC is exposed.
The defensible fix is a genuine, prospective tripartite arrangement that actually makes the tenant liable to the developer — not a retrospective invoice change or a mere "bill it to my tenant" instruction.

Here's a scenario that plays out in almost every commercial complex. A developer allots shops to an owner who isn't GST-registered; the owner leases them to a registered company; and maintenance charges are payable to the developer. The tenant, wanting the ITC, asks for the maintenance invoice in its own name. Simple enough? Under GST, not quite.

The scenario

Take a developer (call it Aayra Developers) that has allotted two shops to an individual owner, Mr R, who is not registered under GST. Mr R leases the shops to Harpreet Ltd., a registered company that runs its business there. Maintenance charges — common-area upkeep, security, cleaning, lifts — are payable to the developer.

If the invoice goes to Mr R, the GST on it becomes his sunk cost (he can't claim ITC). So the parties consider the "convenient" fix: Harpreet Ltd. pays the developer directly, the developer bills Harpreet Ltd. with its GSTIN, and Harpreet Ltd. claims the credit. Commercially neat. Legally, it may not hold.

Who is the "recipient"? Start with liability to pay

Section 2(93) of the CGST Act says that where consideration is payable, the recipient is the person liable to pay it. The first question is therefore not "who paid?" but "who was legally obliged to pay the developer?" — and the answer lives in the allotment letter, maintenance agreement and lease deed.

Read this with Section 2(31), which defines "consideration" and expressly allows it to be paid by the recipient or any other person. GST law openly contemplates one person being the recipient while a different person pays. So payment, by itself, proves nothing about who the recipient is.

Does NOT make you the recipient

Actually paying the maintenance charges
Physically occupying the premises
Enjoying security, lifts, common areas
Having your name & GSTIN on the invoice

DOES make you the recipient

Being contractually liable to pay the developer
Agreements that put that liability on you
Actually receiving the supply in your own right
Conduct & records consistent with that liability

An invoice alone is not ITC

Entitlement to ITC under Section 16 can't rest on merely holding an invoice with your name on it. The credit must relate to an inward supply actually made to you, with all Section 16 conditions met. Rule 46 requires the invoice to carry the recipient's particulars — meaning the actual recipient of the supply, not simply whoever wants the credit.

And the invoice doesn't operate in a vacuum. If the department examines the claim, it can look behind the invoice at the allotment agreement, lease deed, maintenance agreement, correspondence, accounting entries and the flow of money. A mismatch between the invoice and the underlying contract is exactly what puts the ITC in dispute.

A payment instruction is not a restructuring

This is the distinction that decides the case. Compare the two ways parties try to achieve the same result:

	"Bill it to my tenant" instruction	Genuine tripartite arrangement
Who's liable to the developer	Still the owner (Mr R)	The tenant, in its own right
What actually changed	Only the payer & the name on the invoice	The legal relationship for the supply
Developer's role	Just stamps the tenant's GSTIN	Accepts the tenant as recipient, by contract
ITC position	Exposed to dispute	Materially stronger

A real tripartite agreement (developer, owner and tenant) must do more than authorise the developer to print the tenant's GSTIN. It should establish that, for the lease term, the developer supplies maintenance directly to the tenant, the tenant accepts liability to pay the developer in its own right, and the owner authorises this. The developer's invoices, customer master and ledgers must then consistently reflect it.

Don't overlook the valuation angle — Section 15(2)(b)

If maintenance is legally the landlord's obligation as part of the renting supply, but the tenant pays it on the landlord's behalf, Section 15(2)(b) can pull that amount into the value of the rent — a separate consequence beyond the ITC question. So the lease must state clearly whether maintenance is the landlord's obligation forming part of the rent, or something the tenant independently contracts for and bears in its own right.

Get all the documents telling one story

A tripartite addendum can't be read in isolation. If the original allotment agreement still makes the owner unconditionally liable to the developer, while a new document calls the tenant solely liable for the very same charges, that inconsistency itself invites scrutiny. The allotment agreement, lease deed, maintenance agreement, and the developer's records should all align — and the parties must actually behave in line with them. GST follows the substance of the arrangement, not a single clause drafted for tax.

Even a tripartite agreement isn't litigation-proof

A well-structured tripartite arrangement makes direct invoicing far more defensible — but it's not a guarantee. If the substance still shows the liability sits with the owner and the tenant merely pays on his behalf, the department can still challenge the ITC. The defence rests on commercial substance backed by consistent documentation and conduct, not on tax-efficient drafting alone.

Practical steps

Read the documents first. Check the allotment, lease and maintenance agreements to see who is actually liable to pay the developer.
Restructure prospectively, not retrospectively. Don't rewrite old invoices to shift ITC — execute a proper tripartite addendum from a clear future date.
Make liability real. The tenant must genuinely become liable to the developer — and the developer must accept and record the tenant as the recipient.
Keep everything consistent. Invoices, ledgers, payments and conduct should all match the restructured arrangement.
Developers, protect yourselves. Don't issue a B2B invoice with someone's GSTIN just because they want the credit — keep documentary support for why they're the recipient.

Structuring maintenance or lease invoicing?

efiletax reviews your allotment, lease and maintenance agreements and helps set up a defensible tripartite arrangement so the ITC actually holds.

Talk to our GST team

Disclaimer: This article is general information on a technical GST question and is current as at the date of publication. It is not legal or tax advice, and the correct treatment depends on the specific agreements, facts and conduct of the parties. The names used are illustrative. Please consult a qualified professional — talk to efiletax — before acting.