In the latest regulation and implication under the rental of commercial space and businesses of such origin, the government had cleared that the transfer of tenancy rights is liable for the tax as a service.
The finance ministry issues a circular in which the action against the considerations and payments in the form of tenancy premium becomes as a ‘supply of service‘ which further comes under the provision of goods and services tax.
The circular said that “Merely because a transaction or a supply involves execution of documents which may require registration and payment of registration fee and stamp duty, would not preclude them from the scope of supply of goods and services and from payment of GST.”
Also, it is affirmed that the residential renting is still exempted from the tax, which is applicable to the rent received from the rented space given for the residential purpose.
The circular also mentioned that “The activity of transfer of ‘tenancy rights’ is squarely covered under the scope of supply and taxable per-se.”
Accordingly, the landlord has considered as the owner of the property always but the tenant owns the property till the lease. In some cases, if the tenant shares the property with the third party, he has to share the rent with the owner also. The activity of transfer of tenancy right against consideration in the form of tenancy premium is a supply of service liable to GST.
Read Also: Impact of GST on Indian Real Estate Sector
The circular further added that “It is a form of the lease or renting of property and such activity is specifically declared to be a service in Para 2 of Schedule II i.e. any lease, tenancy, easement, licence to occupy land is a supply of services.”
