MUMBAI: Rent or leave and license fees received by an owner of a residential flat, even if such flat has been let out to corporate entities for use by the latter’s employees, will not be subject to goods and services tax (GST). This was recently held by the Authority for Advance Rulings (AAR), Maharashtra.
In cities like Mumbai, residential flats are often let out, on a lease and license basis to business entities. In turn, the concerned company allots these flats to its key executives for their residential purposes. Letting out of residential flats is exempt from GST, but does the mere fact that it is let out to a corporate entity transform its character? This often becomes a contentious issue.Kasturi & Sons, which had proposed to let out some of its residential flats, located in a posh South Mumbai area, to Life Insurance Corporation of India (LIC) approached the AAR. It contended that the flats that are going to be let out are residential apartments and they are going to be used for residential purposes only. Merely because these flats will be taken by LIC does not change the end usage to ‘commercial’
