AAR Ruling on Residential Premises for Commercial Use
🟠 Summary:
The AAR held that the Lessor is liable to pay GST on a forward charge basis at the rate of 18% when a residential property is rented out for commercial purposes.
👉 Here are the key points from the ruling:
📃 AAR Rajasthan’s (Advance Ruling No. RAJ/AAR/2023-24/14, dated November 29, 2023) explores the GST liability for the Lessor when leasing a residential property for commercial use in the case of M/s. Deepak Jain.
🟠 Facts:
– Applicant, M/s. Deepak Jain, a Chartered Accountant, owns a property in Jaipur.
– Despite residential land use by Jaipur Development Authority, the lease designates it for commercial purposes.
– Lessee, Back Office IT Solution Pvt. Ltd., is GST Act registered.
🟠 Issue:
Whether the Lessor (Applicant) is liable to pay GST on a forward charge basis when renting out a residential property for commercial purposes.
🟠 Held:
– AAR assesses if premises meet residential definition under Notification No. 05/2022-Central Tax (Rate).
– Despite retaining residential status, AAR deems non-residential due to commercial use.
– Renting for commercial purposes taxed at 18% under SAC 997212.
– Lessor pays GST at mentioned rate on a forward charge basis.
– Applicant not obligated under Reverse Charge Mechanism as per Notification terms.
– Ruling states premises don’t fall under residential dwelling per Notification.
– Emphasis on premises’ usage and intended users’ stay duration in determining nature.