Renting of Immovable Property to Educational Institution

[Kushal Mishra]

Dear All,

A classic case has arrived just wish to get insight on "Taxability of renting of Immovable Property (buildings) given on rent to Educational Institution in order to set up hostel facility for their students".

What are your thoughts whether the rental receipt from educational institution for building which they are using as hostel will be chargeable to tax in the hand of Owner of the building. Total Rent Charged is more than ₹ 1 Crore Approx.

[KASTURI SETHI]

Sh.Kushal Mishra Ji,

There is one case law on this issue in your favour but it pertains to Service Tax era. The issue is the same. This case law can help you to determine whether the service in question qualifies for the definition of 'supply' in the course of business or furtherance of business provided under Section 7 of CGST Act.

2015 (37) S.T.R. 551 (Tri. - Del.) = 2014 (10) TMI 772 - CESTAT NEW DELHI SINGHANIA ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, RAIPUR

[Kushal Mishra]

Sir,

My take on above matter is also on the same line, where the Building Owner has contracted with the Educational Institution and this contractual terms are squarely within the term of supply of service.

Now, considering the exemption on residential units and taking stand on the same, single residential complex definition defines it is to be used as a residential unit for family. Since it is not for residential unit of family the same also cannot be covered under this exemption also.

[KASTURI SETHI]

Sh.Kushal Mishra Ji,

I agree with you. This activity of supplier is in the course of business. Moreover, in GST where specific exemption is not available, that supply is taxable.

AI Summary

Taxability of rental services: letting property for hostel use qualifies as taxable supply absent a specific exemption.
Renting immovable property to an educational institution for use as a student hostel qualifies as a supply in the course or furtherance of business and is taxable under GST absent a specific exemption; the residential unit exemption does not apply to hostel use. A service tax-era decision (Singhania Enterprises v. Commissioner of Central Excise, Raipur) is cited as supportive authority.