In this case, it involves about 42 single rooms having been sublet by a tenant to students for periods ranging between 3 months to 11 months, AAR noted that the property given out for sub-renting matched that of a hotel rooms with attached bathrooms “which can by no imagination be termed as residential dwelling or a house”.
While renting of accommodation is exempted from the goods and services tax (GST), the authority has ruled, “The exemption prescribed cannot be sought and the lessors have to charge GST while issuing invoice for the lease services. The applicant is not providing the service of leasing in individual capacity to the company but as a part of the group of lessor. It is seen from the agreement that lessors are providing the service of leasing or renting of immovable property for a consideration.”
With this ruling, lessors may not claim GST to be exempt, where end use of the property is residential. One would need to ascertain whether the leased property qualifies as a “residential dwelling” to claim the exemption benefit.
On the basis of the ruling, tax authorities could well begin demanding 18% GST applicable on renting out commercial property from landowners leasing residential hostel-style accommodations to schools, colleges, educational institutions, offices, corporates, or any other establishment.
The Authority on Advance Rulings (AAR), Karnataka has ruled that,”GST is applicable on residential accommodation sublet by a tenant”.