In a recent ruling by the Gujarat Authority for Advance Rulings (AAR), it was determined that leasing a residential building for long-term accommodation remains exempt from the Goods and Services Tax (GST) even when the lease is to a company. The case involved Goldie Ashokbhai Shah, one of the seven co-owners of a residential property intended to be leased to Ashirmara Living Pvt. Ltd. for nine years. The company plans to use the premises exclusively for residential accommodation, not for commercial purposes.
The applicant sought clarification on whether such an arrangement qualifies as exempt residential renting under Entry 12 of Notification 12/2017-CT (Rate). The lease agreement specified that the rent would be shared among the co-owners and that the premises would not be used for commercial office activities. The primary issue was whether leasing a residential dwelling to a company for residential use is exempt from GST.
Read More: GST - Karnataka High Court: Leasing residential premises as hostels to students and working professionals constitutes renting of residential dwelling for use as residence and is exempt from GST [Order attached]
The AAR concluded that the property is indeed a residential dwelling and that its intended use remains residential. Consequently, the transaction falls under the exempt category of residential renting. The ruling emphasized that the lessee's status as a company does not alter the nature of the transaction, provided the use is residential. The leasing arrangement met the conditions of the relevant notification, which exempts the renting of residential dwellings for use as residences. Thus, the monthly lease rent paid to the co-owners does not incur GST liability, and the application was ruled in favor of the applicant.
Party: Goldie Ashokbhai Shah
Order Date: 19 November 2025
Facts
- The applicant is one among seven co-owners of a residential building proposed to be leased to Ashirmara Living Pvt. Ltd. for a period of nine years.
- The lessee intends to use the premises exclusively for providing long-term residential accommodation, and the property is structurally and legally a residential dwelling.
- The applicant sought ruling on whether such leasing qualifies as exempt residential renting under Entry 12 of Notification 12/2017-CT (Rate).
- The lease agreement provides that monthly rent will be shared among co-owners and that the premises will not be used for commercial office activity.
Issue
- Whether leasing a residential dwelling to a company for providing long-term residential accommodation is exempt from GST under Entry 12 of Notification 12/2017-CT (Rate)?
Order
- The Authority held that the property is a residential dwelling and the proposed end-use remains residential, and therefore the supply falls within the scope of exempt residential renting.
- It was observed that the status of the lessee as a company does not change the character of the transaction so long as the use remains residential.
- The leasing arrangement satisfies the conditions of Entry 12 of Notification 12/2017-CT (Rate), which exempts services by way of renting of residential dwelling for use as residence.
- Since the premises will be used for long-term residential occupation, the monthly lease rent payable to the co-owners attracts no GST liability.
- The application was accordingly allowed in favour of the applicant.
