Kerala AAR: Staff Quarters Rented From Unregistered Landlords Attract GST Under RCM; No ITC Allowed

The application has been filed by a company named M/s. Eastern Condiments Pvt. Ltd. (Applicant) before the Kerala Authority for Advance Ruling (AAR) Goods and Services (GST) Tax Department, Tax Tower, Thiruvananthapuram. The personal hearing on the matter was held on June 21, 2024, and June 20, 2025.

The applicant is registered under the GST Act, having GSTIN 32AAACE5276F1ZX and is located at 34/137 A, NH Bypass, Edappally, Kerala, 682024.

The applicant is involved in the business of manufacturing and supplying spice products along with a range of other allied goods. The applicant also provides staff quarters to its employees by renting residential dwellings from various unregistered persons. For such dwellings, around Rs. 6 lakh per month is paid as total rent.

Questions Asked Before Kerala AAR:

Seeking the present Kerala Advance Ruling (No. KER/26/2025), dated August 27, 2025, the applicant has asked the following questions:

Question 1. The Transportation facility and ‘Canteen Facility’ covered in the employment contract for providing services by the employer to the employee will not be subject to GST. Therefore, does the same apply in respect of rented residential dwellings?

Question 2: As there is an employer-employee relationship and the accommodation is provided to the employees, is RCM applicable, and if so, can the applicant take a GST input tax credit in respect of this RCM paid?

Answers Given by Kerala AAR:

The Kerala Authority for Advance Ruling (AAR), Goods and Services Tax (GST), gave the following answers to the questions asked by the applicant:

Answer 1: In answer to the first question, the Kerala AAR said that the applicant rents houses from different landlords. This activity does not involve any employer-employee relationship, and it is not similar to providing transport or canteen services to staff.

Since the applicant is taking these residential properties on rent from unregistered landlords, the applicant must pay GST under the reverse charge mechanism as per the requirement under Sl. No. 5AA of Notification 13/2017-Central Tax (Rate), which was later updated by Notification 5/2022.

Answer 2: As per the answer given for the first question, it is clear that GST does not apply to accommodation provided to employees. However, the practice of leasing out residential dwellings by the applicant from various individuals who are not registered attracts GST on an RCM basis. But, for this practice, the applicant will not be able to avail of ITC (input tax credit).