Taxability of Tenancy Rights under GST

Taxability of Tenancy Rights under GST

Taxability of Tenancy Rights under GST, The Government of India has addressed the Issues 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 of which is in form of tenancy premium Shall attract GST When stamp duty and registration Charges are levied on the said premium. if yes what would the applicable rate?
(ii) Further, in case of  Transfer of Tenancy Rights, a part of the consideration for such transfer accrues to outgoing tenant. whether such supplies Will also attract GST?

The below mention circular has been issued,

Circular No.44/1V201S-CGST

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) / 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 the Transfer of Tenancy Rights to an incoming tenant. consideration of which is in form of tenancy premium Shall attract the GST When stamp duty and registration Charges are levied on the said premium. if yes what would the applicable rate?
(ii) Further, in case of Transfer of Tenancy Rights, a part of the consideration for such transfer accrues to outgoing tenant. whether such supplies Will also attract GST?

2. The issue has been examined. Transfer of Tenancy Rights against Tenancy Premium which is also known as “Pagadi System” is prevalent in some States. In this system the tenant acquires, the tenancy rights in the payment of tenancy (Pagadi), The landlord may be the 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. The tenant also usually has the option to sell the tenancy right of the said property and in such a case has to share an off the With the owner of the land. as laid down in the tenancy agreement. Alternatively, the landlord pays to tenant the prevailing tenancy premium to get the vacated. Such properties in Maharashtra are governed by Maharashtra Rent Control Act. 1999.

3. As section 9(1 ) of the CGST Act, there shall be levied the central tax on the Intrastate Supplies of services. The scope of Supply includes all forms of Goods and Services or both such as the 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 and also includes the activities specified in Schedule II. The activity of transfer of tenancy right against consideration in the form of tenancy premium is a supply of service liable to GST- It is a form of Lease or Renting of property and such activity is specifically declared to be a service in para 2 of Schedule II i.e. any Lease, Tenancy, Easement, Licence to occupy land is a supply of services.