Issue related to taxability of ‘tenancy rights’ under GST- regarding
44/18/2018 Dated:- 2-5-2018 CGST – Circulars / Ordes
GST
Circular No. 44/18/2018-CGST
F. No. 341/28/2017-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
*****
New Delhi, the 2nd May, 2018
To,
The Principal Chief Commissioner/Chief Commissioners/ Principal Commissioner/Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Issue related to taxability of 'tenancy rights' under GST- regarding
Doubts have been raised as to,-
(i) Whether transfer of tenancy rights to an incoming tenant, consideration for which is in form of tenancy premium, shall attract GST
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o usually has the option to sell the tenancy right of the said property and in such a case has to share a percentage of the proceed with owner of land, as laid down in their tenancy agreement. Alternatively, the landlord pays to tenant the prevailing tenancy premium to get the property vacated. Such properties in Maharashtra are governed by Maharashtra Rent Control Act, 1999.
3. As per section 9(1) of the CGST Act there shall be levied central tax on the intra-State supplies of services. The scope of supply includes all forms of supply of goods and services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business a
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lude them from the scope of supply of goods and services and from payment of GST. The transfer of tenancy rights cannot be treated as sale of land or building declared as neither a supply of goods nor of services in para 5 of Schedule III to CGST Act, 2017. Thus a consideration for the said activity shall attract levy of GST.
5. To sum up, the activity of transfer of 'tenancy rights' is squarely covered under the scope of supply and taxable per-se. Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable. However, renting of residential dwelling for use as a residence is exempt [Sl. No. 12 of notification No. 12/2017-Central Tax(Rate)]. Hence, grant of tenancy rights in a residential dwelli
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