Page 68 - CA Final GST

Badlani Classes

a residential house taken on rent is used Not covered in exemption and is taxable.
only or predominantly for commercial
or non-residential use.
if a house is given on rent and the same Not covered in exemption and is taxable
is used as a hotel or a lodge because the person taking it on rent is using
it for a commercial purpose.
rooms in a hotel or a lodge are let out Not covered in exemption and is taxable, as
whether or not for temporary stay a hotel or a lodge is not a residential dwelling
government department allots houses Covered in exemption of services provided
to its employees and charges a license by government [Entry 6]: non-taxable.
free
furnished flats given on rent for Such renting as residential dwelling for the
temporary stay (a few days) bonafide use of a person or his family for a
reasonable period shall be residential use; but
if the same is given for a short stay for
different persons over a period of time, same
is liable to tax.

Renting for partly residential & partly commercial use- Composite or Mixed Supply:
Residential dwelling which is for use partly as a residence and partly for non-residential
purpose like an office of a lawyer or the clinic of a doctor would be a bundled service and
its taxability will be determined as per section 8 viz, if bundling is done naturally in
ordinary course of business, then, taxability is governed by principal supply. If essential
character is residence, then, it would be wholly exempt. In any other case, it would be
mixed supply and taxed at highest-rate viz. wholly taxable.
Circular No. 44/18/2018-CGST F. NO. 341/28/2017-TRU, dated 2-5-2018
Landlord getting premium/pagadi for giving tenancy rights to tenant-Amounts to
supply-Exempt only if relates to residential dwelling for residential use

Note : Transfer of tenancy rights in favour of new tenant is supply: The transfer of
tenancy rights against tenancy premium is also known as “pagadi system”. In this
system, tenant get tenancy rights on payment of tenancy premium (pagadi) to landlord.
The landlord may be owner of the property but the possession of the same lies with the
tenant. The tenant pays periodic rent to the landlord as long as he occupies the property.

Guidance Note:
(a) Permitting use of property for temporary purpose-Covered: Permitting usage
of a property for a temporary purpose like conduct of a marriage or any other social
function would be taxable. As per definition allowing or permitting usage of
immovable property, without transferring possession of such property, is also
renting of immovable property.
(b) Renting of immovable property not taxable in other cases:
• renting of vacant land, with or without a structure, relating to agriculture;
• renting out of any property by Reserve bank of India.
• renting out any property by a Govt. or local authority to non-registered person.

Entry 12 / (i) Residential dwelling for residence-Exempt (Entry 12) : Services by way of renting
13 / 41 of residential dwelling for use as residence. Page67

Central Goods & Services Tax Act, 2017