GST applies on Lease Property Used for Commercial Accommodation: AAR Gujarat

In re Goldie Ashokbhai Shah (GST AAR Gujarat)

M/s Goldie Ashokbhai Shah, a GST-registered individual, approached the Gujarat Authority for Advance Ruling (AAR) seeking clarification on the GST applicability for leasing a co-owned property to M/s Ashimara Living Private Limited, an unregistered company. The property, a residential building in Ahmedabad, was proposed to be leased for nine years to be used by the lessee to provide long-term residential accommodation to students and working professionals. The applicant’s query focused on whether the lease service qualifies for exemption under Entry No. 12 of Notification No. 12/2017-CT (R) (Rate), which provides GST exemption for renting services of residential dwellings, subject to conditions including that the dwelling is used as a residence and not rented to a registered person.

The applicant argued that all conditions for exemption were met. They emphasized that the property is rented, constitutes a residential dwelling, and the lessee is unregistered. They contended that the property’s use by students and working professionals qualifies as residential accommodation, citing Service Tax precedents and judicial interpretations, including the Delhi High Court ruling in P.N. Karkhanis, the Karnataka High Court ruling in Taghar Vasudeva Ambrish, and the Madras High Court ruling in Thai Mookambikaa Ladies Hostel. The applicant clarified that the exemption’s exclusion of student residences or hostels does not apply because the applicant is not directly providing accommodation services but only leasing the property.