Lessor shall Pay GST on Residential Dwelling if utilized for Commercial Purpose on FCM Basis: AAR [Read Order]

The Rajasthan Authority for Advance Ruling (AAR) has ruled that the lessor shall be liable to pay Goods and Services Tax on residential buildings if utilized as demised premises for commercial purposes under forward charge mechanism.

The applicant sought ruling as to whether the Demised premises will be covered in definition of residential dwelling for the purpose of notification No.05/2022-CentralTax (Rate) dated 13/07/2022.

The applicant is engaged in Providing Professional service of Chartered Accountant and currently Senior Partner in B D Jain & Co. Chartered Accountants. Applicant is currently unregistered under GST Act 2017. Applicant is owner of the demised premises.

The applicant has entered into lease agreement with a company incorporated in India (Lessee) which expression shall unless repugnant to the context or meaning thereof, mean to include its successors and permitted assigns) which is inter alia engaged in the business of providing comprehensive, independent fund accounting, reporting, and analytics solutions to fund administrators providing administration services to hedge fund industry.

Land use of property is residential. Lease deed issued by Jaipur development Authority(JDA), Jaipur in the respect of the Demised premises in Residential.

The Authority Bench observed that the property in question has been leased/rented for commercial use. So even if the use of said property has not been changed by JDA but since the

so called residential dwellings does not remain as such as it being used for commercial purposes.

The said supply of service i.e. renting for commercial use is covered under 997212 and taxable

at 18% and the Applicant i.e. lessor is supposed to pay GST as mentioned above on forward charge basis. The lessee is not required to pay GST under RCM basis in terms of Notification No.05/2022-Central Tax (Rate) dated 13.07.2022 effective from 18.07.2022.

The bench of Central Tax Member Umesh Kumar Garg and State Tax Member Mahesh Kumar Gowla thus ruled that commercial property is still taxable as a forward charge.

To Read the full text of the Order CLICK HERE

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