When forming a partnership, one of the essential legal documents required is a partnership deed. This document outlines the rights, responsibilities, and profit-sharing ratio among partners. However, many business owners are unaware of the tax implications, including GST (Goods and Services Tax), on partnership deed charges. In this blog, we’ll break down how GST applies to these charges and what businesses need to keep in mind.
Is GST Applicable on Partnership Deed Charges?
A partnership deed is a legal document that requires stamp duty and registration charges based on state laws. However, the drafting and registration of the deed involve professional services, which may attract GST.
- Stamp Duty & Registration Charges: These are government fees and do not attract GST. The amount varies by state and depends on factors like the capital contribution of partners.
- Professional Fees: If you hire a CA firm in Delhi NCR or any legal expert to draft and register the partnership deed, their service fees will be subject to 18% GST under professional services.
Breakdown of GST & Tax on Partnership Deed Services
If you seek assistance from a CA firm in Delhi NCR, here’s how GST applies:
| Service Type | Tax Applicability | GST Rate |
|---|---|---|
| Stamp Duty & Registration | No GST (Govt. Fee) | 0% |
| Legal Consultation Fee | GST Applicable | 18% |
| Drafting & Documentation | GST Applicable | 18% |
For example, if a CA firm in Delhi NCR charges ₹10,000 for drafting a partnership deed, the total cost including GST (18%) would be ₹11,800.
Income Tax Implications on Partnership Deed Expenses
- Can You Claim Partnership Deed Charges as a Business Expense?
Yes! The stamp duty and legal charges paid for the partnership deed can be claimed as a business expense under Section 37(1) of the Income Tax Act. However, it must be incurred wholly and exclusively for the business. - Impact on Capital Account
Since partnership deed charges are related to business formation, they are usually debited to the capital account and not deducted from taxable income.
How to Save on GST & Tax?
- Opt for an Experienced CA Firm
Choosing a reliable CA firm in Delhi NCR ensures proper GST compliance and tax planning. - Maintain Proper Invoices
Always ask for a GST-compliant invoice from your legal service provider to claim Input Tax Credit (ITC) if applicable. - Register Online
Some states allow e-registration, reducing additional service costs.
Conclusion
Understanding the GST and tax implications on partnership deed charges is crucial for businesses. While stamp duty is exempt from GST, legal and drafting services attract 18% GST. Business owners should also consider these costs while planning their partnership structure and seek expert advice from a CA firm in Delhi NCR for proper tax-saving strategies.
Would you like help with a customized tax-saving plan for your partnership business? Let us know in the comments!