Ind AS vs GST: Two Different Worlds… or Maybe Not?
As GST professionals, our focus remains confined to an already overloaded framework of Acts, Rules, Notifications, Circulars, AARs and Court Rulings.
And let’s be honest — that alone is more than enough to keep us busy. Even within this universe, most of us rarely get the time to cover every clause or amendment that flows in week after week.
So, when someone brings up Ind AS—the accounting standards followed for financial reporting—the most common response is:
“That’s not my area. The finance team will take care of that.”
But what if I told you that there are situations where sticking strictly to GST boundaries isn’t enough?
Where, to handle things effectively, you need to step into the shoes of an F&A team, even if just for a while.
Let’s Better Understand This With a Real World Example
Imagine a company takes a commercial property on lease — let’s say for a 15-year period.
Traditionally, from a GST perspective, here’s how we interpret it:
> It’s an operating lease
>Ownership remains with the lessor
>You book monthly rent expense
>ITC is eligible as per GST provisions
Simple and sorted… right?
At least, that’s what we think until accounting comes into the picture.
Now Comes: Ind AS 116 – Leases
Ind AS 116 has completely changed the landscape of lease accounting, especially for lessees.
Under this standard, the old distinction between operating lease and finance lease is eliminated — at least from the lessee’s side.
Unless the lease is short-term (less than 12 months) or of low value, the treatment is now uniform and involves:
> Recognizing a Right-of-Use (ROU) Asset representing your right to use the leased property
>Recording a Lease Liability showing your obligation to make future lease payments
>Computing both based on the Present Value (PV) of lease payments
>Presenting them in the balance sheet
Charging Depreciation on the asset and interest on the liability to the P&L
This approach follows the “substance over form” principle. Even if you don’t own the property, the fact that you control and use it for a long duration makes it financially significant.
And Now Comes the GST Part
Now let’s say this transaction shows up during a GST audit or Input tax credit review.
The GST officer flips through your financials and sees:
> An ROU Asset recorded on the asset side
Lease Liability on the other
>ITC claimed on lease invoices
>And the leased property happens to be immovable
Their natural reaction?
“Have you capitalized an immovable property?
If yes, isn’t ITC blocked under Section 17(5)?”
It looks like a capital asset to someone not familiar with Ind AS 116.
But in reality, it’s not.
It’s simply a disclosure requirement of an operating lease under accounting principles.
So What Do You Do?
This is where your ability to understand and explain Ind AS 116 becomes crucial.
Because not all officers will have accounting knowledge.
This is where your deep understanding of Ind AS 116 becomes not just valuable, but essential.
In many discussions, especially those involving lease arrangements, you might be the only person in the room who understands both the tax implications and the accounting treatment.
Most officers or stakeholders may not have a background in accounting.
They might be experts in operations, legal, or finance — but not necessarily in the nuances of accounting standards.
That’s your moment to translate complex accounting principles into practical insights that others can act on.
But you can only do that confidently and credibly if you’ve taken the time to truly understand the standard.
For example, in our case, ask yourself:
>Why the standard was introduced and >what problem it solves
>How it changes the way leases are recognized and measured
>When you understand these elements deeply, you’re not just reciting rules, You’re telling the story behind the numbers.
That’s what makes your input powerful and respected.
A New Reality for GST Professionals
The days of working in silos are long gone.
In today’s landscape, a GST expert must be multi-lingual. Able to speak not just tax, but also a little accounting, finance, and business operations.
And Ind AS 116 is a perfect example of this intersection between tax and financial reporting.
Final Thought: Sometimes, your strongest arguments don’t come from the GST Act. They come from your understanding of what lies outside it
Author Bio
Very informative article.
Truly this is need of hour and professionals will have to keep their eyes open in all the areas to have better understandings.