In re Jay (GST AAR Andhra Pradesh)
In the case of In re Jay (GST AAR Andhra Pradesh), M/s Jay, the owner of a commercial building leased to the Andhra Pradesh Lokayukta, sought clarification regarding the application of Goods and Services Tax (GST) on rent. The applicant raised questions regarding who is liable to pay GST on rent—the owner or the tenant (government)—and whether there are any special provisions in the GST Act for government-occupied private buildings. M/s Jay entered into a lease agreement with the Andhra Pradesh government for a two-year period, with a renewal clause and rent escalation. The lease also outlined the payment of maintenance charges and GST on rent, which the lessee, the Andhra Pradesh Lokayukta, was expected to pay. However, issues arose when the government department refused to bear the GST on rent, arguing that the owner (lessor) should be liable for the tax. This led to the owner seeking clarity on the applicable GST provisions through an advance ruling application.
The applicant’s interpretation was based on Notification No. 04/2022-Central Tax (Rate), which indicated that GST on rent in cases involving government tenants should be paid by the tenant under the reverse charge mechanism. During the proceedings, the applicant emphasized that the lease deed explicitly mentioned the tenant’s responsibility to pay the GST. However, the lessee (the government) argued otherwise, resulting in the applicant filing complaints and legal notices for non-compliance with the lease terms. The matter remains unresolved as of the applicant’s last submission, which included a request for a ruling on whether the GST on rent in such cases should be borne by the owner or tenant. The AAR’s ruling, which is yet to be concluded, will clarify the issue of GST liability for government-occupied private buildings and establish whether any special provisions apply under the GST framework.
