Residential Leases for Exclusive Use are Exempt from GST
Issue: Whether Goods and Services Tax (GST) is leviable on the renting or leasing of residential property when used exclusively for residential purposes, and consequently, whether GST and water charges should be included in the computation of lease rent for the purpose of assessing stamp duty.
Facts:
- The petitioner, Mr. Gurdev Raj Kumar, entered into a lease deed (dated July 1, 2020) for a property explicitly stipulated to be used solely for residential purposes.
- The Collector of Stamps (Respondent) ordered the petitioner to pay deficient stamp duty and a penalty, alleging that GST was applicable to the rent and should be included, along with water charges, for stamp duty computation.
- The petitioner challenged the order, arguing that such leases are explicitly exempt from GST and that tax cannot form part of the lease rent for stamp duty calculation.
Decision:
The Delhi High Court quashed the impugned order demanding deficient stamp duty and penalty. The Court held that the claim for including GST in the lease rent computation was misplaced because the transaction is exempt from GST. A refund of the additional amount paid (₹2,58,700) was directed to the petitioner.
Key TakeDowns:
- GST Exemption Confirmed: The Court explicitly affirmed that the renting/leasing of residential dwellings for use as a residence is exempt from GST as per Entry No. 12 of Notification No. 12/2017-Central Tax (Rate).
- GST Excluded from Stamp Duty: Even if GST were applicable, it is not includible in the lease rent for the purpose of stamp duty computation on residential lease deeds under the Indian Stamp Act, 1899, as GST on rent is not a recurring charge on the property.
- Water Charges Excluded: The Court also ruled that water charges cannot be included in the lease rent for stamp duty calculation, as water is considered movable property and stamp duty calculation relates to immovable property. * Scope of Exemption: The exemption applies only when the residential dwelling is used “for use as residence,” meaning commercial or non-residential use voids the exemption.
Source :- Judgement