Rent or leave and license fees to obtain via the owner of a residential flat, despite when these flats are let out to the corporate entities towards the user via the news employees shall not be levied with GST. the same ruling was being given by the Authority for Advance Rulings (AAR), Maharashtra.
Residential flats are usually let out, on a lease and license basis to the business entities also the related company provides these flats to its executives for their residential basis. Letting out of the residential flats would be GST exempted. Sometimes the issue gets arises Kasturi & Sons which has proposed to let out some of its residential flats located in a posh South Mumbai area to the Life insurance corporation of India (LIC) approached AAR. the same specified that the flats that are for let out are the residential apartments. Only because LIC has taken these flats and would not amend to commercial usage.
On the bench, Rajiv Magoo and R. R. Ramnani held that flats that are used for residential purposes, no matter if they are let out to the person or to the commercial entities would be covered by the exemption notification on June 28, 2017. For the case, it was for the residential purposes, Kasturi & Sons will not require to furnish GST on the monthly leave and license fee obtained by it (This was proposed to be Rs 145/sqft).
Indirect tax specialist and founder of CA firm, tax expert mentioned that “The exemption is available if the property being let out is a residential dwelling and is used for residential purposes. If the property is used for commercial purposes, the exemption is not available and the landlord or licensor would be required to register and pay GST at 18% if the annual rent crosses 20 lakhs.”
Tax expert specified that “The ruling correctly holds that the commercial nature of licensee (which is LIC) would not be relevant to decide the eligibility for the exemption but the actual use of the property – residential stay by employees of LIC is the determining factor.” The AAR bench ruled that the submissions made via the jurisdictional GST council mentioned all the facts. LIC is a commercial firm and thus the staff to whom the flat is let out could sit late in the office and work for later hours. LIC secures a profitable company. To increase the profit the facility of the residential quarters is provided to the employees which are for commercial use.
AAR revealed that the jurisdictional officer specified that the exemption notification shall not apply, however, he has not been able to give any reasoning for his statement. Inside the ruling, the AAR bench indeed referred to an identical advance ruling provided by the West Bengal bench. “The GST applicability is not decided by the nature of the property, but by the purpose for which it is used,” while pressurizing the AAR bench ruled that the exemption notification shall be applied.
