NO GST on lease income from residential property

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 Residential apartments let out to commercial organisation for residential use of their staff does not make it commercial lease

M/s. Kasturi & Sons, (The Applicant) had proposed to let out some of its residential flats, located in a posh South Mumbai area, to Life Insurance Corporation of India (LIC) approached the AAR on the taxability under GST.

It contended that the flats that are going to be let out are residential apartments and they are going to be used for residential purposes only. Merely because these flats will be taken by LIC does not change the end usage to ‘commercial.

The applicant charges license fee for residential rate.

The question is whether this activity is liable for. GST ?

The Applicant claims that just because it was taken by a commercial organiastion for the residential usage of their staff members, the same cannot be treated as usage for commercial purpose.

AAR, Maharastra, dismissed the arguments of GST officer that tenant is a commercial organisation and hence the staff to whom the flat is let out, can sit late in office and work more. And company is making more profit out of this, hence it is not for residential purpose.

AAR held that GST applicability is not decided by the nature of the property but by the purpose for which it is used.

GST exemption is allowed to applicant.

The exemption is available if the property being let out is a residential dwelling and is used for residential purposes. If the property is used for commercial purposes, the exemption is not available and the landlord or licensor would be required to register and pay GST at 18% if the annual rent crosses 20 lakhs.

In my humble opinion also Notification No.12/2017-CT (Rate) is very clear wherein it gives exemption to the nature of the property and its usage and not by the status of recipient and I stand by the correct and judicious decision of AAR, Maharastra.

SRIVATSAN.R.

MEPZ-SEZ,

Chennai.

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