Renting and leasing of residential property is a very common transaction undertaken by many private individuals and commercial organisation. For the purpose of GST, the term “Renting” in relation of immovable property means allowing, permitting, or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangement[1]. As per the provision of CGST Act, 2017 such transaction of renting and leasing is considered as supply of services thus attracting GST implication[2].
As per the entry 12 under the Heading 9963 and 9972 of the Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 services provided by ways of renting of residential dwelling units for use of residence was taxed as NIL i.e., it is exempted from being taxed. Therefore, when the question – “whether applicant is exempted from the payment of GST on monthly fee received from letting out his residential property to a commercial organisation for residential purpose of their staff” came before the Maharashtra Authority for Advance Ruling, the bench clearly stated, “As per the schedule of the Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 the unit must be given on rental basis for residential purpose. The entry does not mention to whom such services must be supplied. Hence, exemption is applicable based on nature of property and its usage and not by the status of the recipient”[3]
The GST Counsel in its 47th Meeting issued a press release dated 29.06.2022 wherein entry 2 of point C4 it was recommended by the Council that the GST exemption available on renting of residential dwelling to business entities (registered person) only was withdrawn w.e.f 18.07.2022[4]. Thus, such transactions will be taxed at the rate of 18%.
Note- Renting of residential property is taxable if rented by business entity (commercial organisation) and not when rented by a private individual for personal use.
[1] Section 2 (zz) of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 available at: Notification12-CGST.pdf (cbic.gov.in)
[2] Section 7(a) of CGST Act, 2017.
[3] M/s Kasturi & Sons, No. GST-ARA-67/2020-21/B-72, Maharashtra Authority for Advance Ruling , dated 31.05.2022 available at: MAH_AAR_67_2020-21_B-72_31.05.2022_Kasturi & Sons.pdf (gstcouncil.gov.in)
[4] Ministry of Finance, Recommendation of 47th GST Council Meeting, available at: PIB1838020.pdf (gstcouncil.gov.in)
