Section 7 deals with Scope of Supply. For the purpose of GST Act, it includes:

All forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Thus, under GST regime, the inclusion of words, “license, rental, lease” are covered within the definition of supply itself. Thus, the intention of the Government seems to be clear to levy tax on commercial rentals and short-term accommodation (subject to threshold limits) at the same time to exempt residential rentals.

There are two fold tests to determine the eligibility of exemption in case of residential rentals under GST regime – viz., ( i) the nature of property test, i.e., the property should a residential building, i.e., “residential dwelling” and secondly the property should be used as a residence. Other factors are not material such as registration of the lessor or lessee.

If such spaces are rented through commerce operators then such operators are required to pay under Section 9(5) of the CGST Act. In cases where the supplier is unregistered, where the supplier is registered, tax shall be paid on forward charges basis but may attract “Collection of tax at source” under Section 52 of the CGST Act, 2017.

The above tax provisions apparently look very simple on paper, but various structures emerged which necessitated specific addressal by the Government. For example, a structure where residential properties are rented and used as residence but managed by third parties as part of their commercial operations. For example, a residential property with many units is taken on rent by a commercial operator and run as managed paying guest accommodations or hotels. Further, erratic and irregularities in these structures may exist whereby the commercial operator in turn sub-lets to the tenants, i.e., sub-let model or the property is directly rented by land owner to the tenants with commercial operators taking their share by service fees charged to tenant or land owner or existence of such multiple operators or managing properties for educational institutions etc. Further, the commercial operator may be running rental through e-commerce operator.

Under GST Act, various rulings of Authority for Advance Rulings were pronounced wherein some of these structures were evaluated. Particularly, ruling of Karnataka High Court in case of Taghar Vasudeva Ambrish Vs. Appellate Authority for Advance Ruling 91 GST 750 ( Karn.) wherein the Hon’ble High Court held that the exemption notification does not require the lessee itself to use the premises as residence and hence, GST on renting of Immovable Property as long as the dual conditions of residential dwelling and use for residential purposes are fulfilled, the service remains exempt.

Amendment effective from 18th July, 2022

The  Government  has  made  series  of amendments effective from 18th July, 2022 which are summarized as under:

  1. A new condition has been laid down to the exemption notification for residential rentals, whereby apart from the nature of dwelling and end- use conditions, which existed earlier, exemption from GST is not available where the residential dwelling is rented to a registered person such residential rental services not covered under the exemption notification and now taxed at 18%.
  2. The exemption limit of Rs. 1000/- per day is removed in the case of hotels, inns, composites etc. and such services are now taxed at 12% (where declared tariff per day is more than Rs. 7,500/- per day, applicable tax rate remains unchanged at 18%).
  3. Services by way of renting of residential dwelling to a registered person is now covered under reverse charging mechanism where the lessee will be the person responsible to remit tax, irrespective of end I now try to simplify the understanding of GST implications on property in general. Specific implications have to be evaluated appropriately in accordance with applicable law.

Taxpayers may look out for the following implications and ambiguities which prevails:

RCM applies even when residential dwelling is used for commercial purposes by lessee who is a registered person. In other words, if “residential dwelling” is taken on rent as a commercial office by any registered taxpayer, GST is now payable under RCM even if the Landlord is registered (RCM is not optional).

Where the managed properties such as hotels are directly rented to end customers, the agreement between the landlord and the operator needs to be checked for implied “renting” between landowner and managed service operator, based on substance and conduct of the parties.

Corporates taking residences on rent for providing rent free accommodation to employees or as hotels etc. may be required to remit GST under RCM.

“Residential dwelling” is not under GST laws. Guidance may be taken from records of Municipal office and other authorities, categorization for the purposes of electricity, water, utilities, property tax rates etc.

Input Tax Credit will not be available in cases where output tax is paid under RCM basis by the recipient or output tax is exempt.

Where residential dwelling is taken on rent by registered person, GST shall be payable under RCM in both the cases of the rentals. Thereby, the GST paid under RCM by the first lessee shall not be creditable and will become a cost. Thus, the credit chain would be broken.

Lessor and Lessee should have concurrence on the nature of property and its end-use. It is suggested to include the same expressly in the rental agreements to avoid future disputes relating to facts.

Other implications on rentals affecting charitable trusts, long term rentals, rental from government etc. are not covered in this article and the same has to be considered separately in the light of facts available. Rental of residential dwellings taken by GST on renting of Immovable Property educational institutions, hospital etc. for use as a residence such as hotels, paying guests etc. may become taxable if such educational institution / hospital is required to obtain GST registration for any tax purpose place of supply in case of rentals would be where the property is located. Hence, for payment of tax under RCM, the registered person would be required to remit tax from the state where the property is located.


From the above, it can be seen that taxability person liable to pay tax, rate of tax, input credit and other implications vary based on several permutations and combinations involved.

The implications also vary based on certain key words and phrases such as “residential dwellings” and use as “residence” which are not expressly covers or defined under the law. Government may take note of it and clarify the scope and ambit of the vagueness in order to avoid endless litigations. Law must be simple, easy to understand, no vagueness and clarity is most essential


Approval of Resolution Plan under IBC: A Raging Controversy on Tax Assessments of earlier years

  1. Raj Shipping Agencies Barge Madhwa & Anr., and other connected matters, 2020 SCC OnLine Bom 651.
  2. CIT v. Monnet Ispat and Energy Limited (2018) 18 SCC 786.
  3. Sundaresh Bhatt, Liquidator of ABG Shipyard Central Board of Indirect Taxes and Customs [2022] 141 47 (SC).
  4. See Statements of Objects and Reasons of
  5. Kridhan Infrastructure Private Limited Venkatesan Sakaranarayan & Ors. 2020 SCC OnLine SC 889.
  6. Mohanraj and Ors. v. Shah Brothers Ispat Pvt. Ltd. (2021) 6 SCC 258.
  7. Binani Industries Bank of Baroda & Anr. 2018 SCC OnLine NCLAT 521 – confirmed by the Supreme Court in 2020 SCC OnLine SC 1185.
  8. See Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,
  9. Ghanashyam Mishra & Sons Pvt. Ltd. (supra), Karad Urban Cooperative Bank Limited v. Swwapnil Bhingardevay & Ors (2020) 9 SCC 729, K. Sashidhar v. Indian Overseas Bank & Ors (2019) 12 SCC 150, Committee of Creditors of Essar Steel India Limited Satish Kumar Gupta & Ors. (2020) 8 SCC 531, Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Ors. (2020) 11 SCC 467, Kalpraj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. & Anr. (2021) 10 SCC 401.
  10. Swiss Ribbons Ltd. and Ors. v. Union of India (UOI) and Ors. (2019) 4 SCC 17.
  11. Committee of Creditors of Essar Steel India Limited Satish Kumar Gupta & Ors. (supra).
  12. (2022) 6 SCC
  13. 2021 SCC OnLine Bom 6187 : [2022] 441 ITR 8 (Bom.).
  14. MANU/TL/0061/2022.
  15. ITA 832 of 2017 and 2014 of 2018 (Order dated 25th October 2021 passed by the Bombay High Court).
  16. 2021 SCC OnLine Mad
  17. Writ Appeal 1849 of 2021.
  18. Judgement dated 6th September 2022 in Civil Appeal 1661 of 2020.
  19. [2022] 139 com 493 (Mad.).
  20. Order dated 15th September 2021 passed by the Supreme Court in Civil Appeal 3290 of 2017.
  21. See Rajya Sabha debates on 29th July 2019 when the Bill for amending IBC came up for
  22. Ibid.
  23. [2022] 445 ITR 15 (Bom.).

 Liability in special cases

  1. Effective from 10.1975
  2. Yeshwant Raghunath Bhide ITO (1974) 94 ITR 0370
  3. UOI & v. Manik Dattatreya Lotlikar (1988) 172 ITR 1, Cf. Ratanlal v. ITO 130 ITR 797
  4. [(1979) 118 ITR 57]
  5. Memorandum to Finance Bill, 2022
  6. Gadadhar Dey & v. Tax Recovery Officer & Ors. (1974) 96 ITR 543
  7. Ebrahim & Ors. v. DCIT 332 ITR 122, Pravinbhai M. Kheni v. ACIT 353 ITR 585
  8. Arvind Kumar Gupta 276 ITR 373
  9. Darshan CIT 222 ITR 608
  10. V. Reddy & anr. v. ACIT & Anr (1998) 232 ITR 306; Dipak Dutta v. UOI & Ors. (2004) 268 ITR 302; Indubhai T. Vasa (HUF)
  11. Income-Tax Officer (2006) 282 ITR 120
  12. Writ Petition 1122 of 2018, High Court of Bombay, Date of Decision: 26.04.2018
  13. [(2017) 394 ITR 0 321 (Guj)]
  14. Rajendra Singh versus Assistant Commissioner of Income Tax and Ors. [WP/3590/2019 date- 26th July 2022

 Substantive Rights of Taxpayers in an International Context

  1. R Avi-Yonah, ‘International Tax as International Law’ (2004) 57 Tax L Rev
  2. ICJ, Nottebohm (Liechtenstein v Guatemala), Rep 1955, [1955]; cf also S Gad o, ‘The Principle of “Nexus” or “Genuine Link” as a Keystone of International Income Tax Law: A Reappraisal’ (2018) 46 (3) Intertax 194 and ff. S Gad o, ‘The Principle of “Nexus” or “Genuine Link”’ 206; see generally, C Ryngaert and D Hora Siccama, ‘Ascertaining Customary International Law: An Inquiry into the Methods Used by Domestic Courts’ (2018) 65 Netherlands International Law Review 1–25.
  3. Article 25 of the OECD/UN model convention, Action 14 of the BEPS convention
  4. Mutual Agreement Procedure
  6. Adam Smith : Wealth of Nations 1776
  7. With the notable exceptions of some Middle Eastern and South American schools of
  8. Karen Steyn (1997) Consistency – A Principle of Public Law?, Judicial Review, 2:1, 22-26
  9. See for example Press Release from the German Supreme Court : Press Release 9/2016 of 12 February 2016, Case: BVerfG, Order of the Second Senate of 15 December 2015 – 2 BvL 1/12 -, paras. 1-26, For the contrary viewpoint see Sanofi Pasteur Holdings SA vs Department of Revenue , Ministry of Finance ([2013] 30 222 (Andhra Pradesh)/[2013] 213 Taxman 504 (Andhra Pradesh)/[2013] 354 ITR 316 (Andhra Pradesh)/[2013] 257 CTR 401 (Andhra Pradesh)[15-02-2013] ), Despite both being dualist nations.
  10. Inland Revenue Commissioners Duke of Westminster [1936] A.C. 1; 19 TC 490.
    247 CTR 1 (SC)[20-01-2012]
  11. Concentrix Services Netherlands B. V. v. ITO [2021] 127 43/434 ITR 516 (Delhi), Deccan Holdings BV v. ITO ([2021] 133 94 (Delhi)/[2022] 284 Taxman 300 (Delhi)/[2022] 445 ITR 486 (Delhi)[25-10-2021]), Steria (India) v. CIT [2016] 72 1/241 Taxman 268/386 ITR 390 (Delhi) (para 8), Apollo Tyres Ltd. v. CIT International Taxation [2018] 92 166 (Kar.) (para 8), EPCOS Electronic Components S.A v. Union of India [2019] 107 taxmann. com 227/266 Taxman 23 (Delhi) (para 8), Corocraft Ltd. v. Pan American Airways Inc. [1968] 3 W.L.R. 1273 (CA) (para 18), Fothergill v. Monarch Airlines [1980] 3 W.L.R. 209 (para 18)
  12. Hon’ble Supreme Court in Union of India Ashish Agarwal [2022] 138 64(SC) dated [04-05-2022]
  13. Definition of intermediary as per Art3(21) of EU Council Directive 2011/16 (Amended)
  14. Vodafone Intl Holdings BV v. UOI [2012] 17 com 202 (SC)/[2012] 204 Taxman 408(SC)/ [2012] 341 ITR 1 (SC)/[2012]
  15. Also see OECD BEPS Multilateral Instrument Article , Art 6 & 7
  16. High Court of South Africa, Pienaar Brothers (Pty) Ltd v Commissioner for the South African Revenue Service, case 87760/2014, 20 ITLR 284 [2017], CJEU, judgment of 26 April 2006, Goed Wonen, case C-376/02, ECLI:EU:C:2005:251 [2006]
  17. Starr International Co Inc v. USA (20 ITLR 94), Alta Energy Luxembourg SARL v R (2018) TCC 152, Mitsubishi Corp India Pvt Ltd vs DCIT ITA 5041 of 2011 (Del), Petition of Bayerische Beamtenkrankenkasse AG(DTA No 824762, 20 ITLR 357), Saint Gobain C-307/97 , Memec PLC v. CIR [1998] STC 754 etc….
  18. Japanese Taxation of Internet Sales [2016] 19 ITLR 346, DIT E-Funds IT Solutions [2017] SLP no 27494 of 2017
  19. Luxembourg and Amazon State Aid [SA 38944V], Maruti Suzuki India v. ACIT [2013], PCIT vs Mphasis Ltd[2021] 133 com 275 (SC)/[2022] 284 Taxman 458 (SC)[20-09-2021]
  20. Boake Allen Ltd vs Revenue and Customs Commissioners [2007] UKHL 27 (House of Lords)
  21. Circular no. 3/2022 [F.NO. 503/1/2021-FT&TR-I], dated 3-2-2022, clarification regarding the most-favoured-nation (MFN) clause in the protocol to INDIA’S DTAA’S with certain countries issued by the CBDT, inter alia ; Sanofi Pasteur Holdings SA vs Department of Revenue , Ministry of Finance ([2013] 30 222 (Andhra Pradesh)/[2013] 213 Taxman 504 (Andhra Pradesh)/[2013] 354 ITR 316 (Andhra Pradesh)/[2013] 257 CTR 401 (Andhra Pradesh)[15-02-2013], Concentrix Services Netherlands B. V. v. ITO [2021] 127 43/434 ITR 516 (Delhi) , Deccan Holdings BV vs ITO ([2021] 133 taxmann. com 94 (Delhi)/[2022] 284 Taxman 300 (Delhi)/[2022] 445 ITR 486 (Delhi)[25-10-2021]), Steria (India) Ltd. v. CIT [2016] 72 com 1/241 Taxman 268/386 ITR 390 (Delhi) (para 8), Apollo Tyres Ltd. v. CIT International Taxation [2018] 92 taxmann. com 166 (Kar.) (para 8), Also See Treaty of Functioning of the European Union : Non-Discrimination Article 18.
  22. Ibid 21 above…
  23. Ram Jethmalani v UOI and Ors [2011] 13 com 189 (SC)/[2011] 202 Taxman 115 (SC)[23-09-2011]
  24. Intergovernmental Agreements, FATCA, The Information Exchange Agreement, Article 26 OECD and UN Model Conventions, OECD BEPS MLI Article 6
  25. Alexandru Bittner, Petitioner United States (20-40597)
  26. Ram Jethmalani vs UOI [2011] 13 189 (SC)/[2011] 202 Taxman 115 (SC)[23-09-2011], CCT v. Shukla Brothers 2010 (4) SCC 785 , New India Assurance Co. Ltd. v. Nusli Neville Wadia [2008] 3 SCC 279, State of Kerala v. K.T. Shaduli Grocery Dealer [1977] 2 SCC 777, Tribunal (TM) in Sunil Agarwal v. Asstt. CIT [2002] 83 ITD 1 (Delhi) (TM), CIT v. Virgin Securities & Credits (P.) Ltd. [2011] 332 ITR 396/[2012] 20 681 (Delhi) , CIT v. SMC Share Brokers Ltd. [2007] 288 ITR 345/159 Taxman 306 (Delhi), Vasantlal & Co. v. CIT [1962] 45 ITR 206 (SC), CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal.).
  27. State of UP Sudhir Kumar Singh, 2020 SCC OnLine SC 847

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