2024 (12) TMI 396 - AAR - GST

Levy of GST on rent who has to pay owner or tenant - special provision in GST Act for Government Occupied Private Building - Who is liable for GST on rent owner or tenant? - GST on rent has to borne by owner for Government occupied private buildings or not. HELD THAT - GST shall apply on lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, which is a supply of service. Lease is where possession is transferred along with the right to use immovable property with a duty to care, protect and return along with consideration in the form of non-recurring premium only or along with recurring rent. Essence of lease being delivery of possession along with user rights. Supplier of lease does not have possession, does not have the right to use but retains right to possession after term of lease. The applicant letting out his building which is a commercial property as per the occupancy certificate issued by the Town planning department, Kurnool Municipal Corporation dated 07-01-2022.The activity of the taxpayer fits under the scope of supply defined under section 7 (1A). Leasing of Commercial property is subjected to GST (Goods and Services Tax) at the rate of 18% (with SAC code 997212 Rental or leasing services involving own or leased non-residential property) and the service provider need to collect GST on such lease and he shall be liable to pay if he crosses the Threshold limit of taxable turnover under the provisions of GST. The applicant interprets the Notification No. 04/2022-Central Tax (Rate) dated 13th July 2022 and No. 05/2022-Central Tax (Rate), dated 13 th July 2022 which indicate that GST on rent is payable by the tenant (government) under the reverse charge mechanism. But, Notification 4/2022 is about exemption to residential dwellings and 5/2022 relates to reverse charge in respect of residential dwellings. Both are not applicable to renting of commercial property and also to the present case. Thus, it is clearly established that the applicant has leased out his commercial building premises for setting up the Institution of Lokayukta of Andhra Pradesh Government - the applicant, being a lessor and registered supplier of services of Leasing of Commercial property, is liable for remitting GST on lease consideration under Section 9 read with section 15 of the GST Act.

Summary

Issues Involved:

1. Liability for GST on rent: owner or tenant?
2. Special provisions in GST for government-occupied private buildings.
3. Applicability of reverse charge mechanism for GST on rent for government-occupied private buildings.

Issue-wise Detailed Analysis:

1. Liability for GST on Rent: Owner or Tenant?

The core issue addressed is who is responsible for paying GST on rent for a commercial property leased to a government entity. The ruling clarifies that GST on lease is to be paid by the registered service provider, i.e., the building owner, under the forward charge mechanism. This determination is based on the provisions of Section 7 (1A) of the CGST/SGST Act, 2017, which classify the leasing out of immovable property as a taxable supply. The applicant, being the lessor and a registered supplier of leasing services, is liable for remitting GST on the lease consideration under Section 9 read with Section 15 of the GST Act. The ruling emphasizes that unless a specific provision shifts the liability to the tenant under the Reverse Charge Mechanism (RCM), the owner remains liable.

2. Special Provisions in GST for Government-Occupied Private Buildings

The applicant sought clarification on whether there are any special provisions in the GST Act for government-occupied private buildings. The ruling explicitly states that there is no specific provision in the GST Act that addresses government-occupied private buildings. Therefore, the standard GST provisions regarding the liability of the service provider apply, regardless of the tenant's government status.

3. Applicability of Reverse Charge Mechanism for GST on Rent for Government-Occupied Private Buildings

The applicant referenced Notification No. 04/2022-Central Tax (Rate) and No. 05/2022-Central Tax (Rate), suggesting that GST on rent should be payable by the tenant (government) under the reverse charge mechanism. However, the ruling clarifies that these notifications pertain to residential dwellings and do not apply to the renting of commercial property. As such, the reverse charge mechanism is not applicable in this case, and the liability remains with the owner.

Conclusion:

The ruling concludes that the applicant, as the lessor and registered service provider, is liable to remit GST on the rental services provided. The GST on rent for the commercial property leased to the government entity must be paid by the building owner under the forward charge mechanism, as there are no specific provisions or applicable reverse charge mechanisms that shift this liability to the tenant.