AAR: Leasing Building to Unregistered Lessee for Further Residential Accommodation Attracts 18% GST

The applicant, Goldie Ashokbhai Shah, agreed to lease its residential building for nine years to the lessee company, which is not registered under the GST regime. The lessee will use the property to provide residential accommodation to the students and working professionals. The lessee is liable to pay a rent of 12,00,000 per month.

The applicant filed an application to get an advance ruling on the following questions:

“1. Whether the service of renting of Residential building provided by the Applicant to the Lessee, an unregistered person, for use as residential accommodation for the students and working professionals (“the Residents”), is exempt as per S. No. 12 of the Exemption Notification No. 12/2017 Central Tax (Rate) dated 28 June 2017 and corresponding exemption notification issued under the Gujarat State GST Act?

2. If the answer to above question is in negative, who shall be the person liable to pay GST on the impugned service of renting of residential dwelling and what shall be the applicable rate of GST thereupon?”

As per the Gujarat Authority for Advance Ruling, the service of renting of Residential building by the applicant to the lessee, who is an unregistered person, to use it as the residential accommodation for the students and the working professional is subject to GST and the applicant must pay the GST on such services at the rate of 18%, as per the Notification No. 11/2017-CGST(R) dtd. 28.06.2017.