GST on Guest House Given to employee on Rent

[AdvMurari Kumar]

Dear Expert,

Please advice if GST is applicable on Guest House given to employee on rent for the period of one year. rent will be paid by employee.

[KASTURI SETHI]

Sh.Muarari Kumar Ji,

Don't you think that renting of immovable property in the form of Guest House by a company is in the course or furtherance of business of business ?

[Ganeshan Kalyani]

Guest house and a residential dwelling is different. The exemption notification contains the word 'residential dwelling'. Guest house given on rent by company to employee is taxable.

[Nikhil Virkar]

If the said benefit is in terms of perquisites as per Income Tax Act and it is specified in contractual agreement between employer and employee i.e an appointment letter + corrigendum to the same, tax is not applicable in terms of CBIC Circular 172/04/2022-GST dtd 6.7.22. No one can consider this as gift valued >50k as per Schedule I. Please correct my view Sirs.

[KASTURI SETHI]

Circular No.172/04/2022-GST dated 06.7.2022 ( serial No. 5 and clarification no.2) talks of 'perquisite'. If we see the legal meaning of 'perquisite' , the employer should not recover amount of rent from its employee. If the employer charges rent, it is commercial activity. Hence GST is payable. Otherwise also Guest House is integrally related to the business I support the views of Sh.Ganeshan Kalyani Ji.

[Shilpi Jain]

In case the company is not receiving any rent for the GH given on rent to employee then no question of tax in hands of the Company.

From the question I understand that the employee is paying the rent to the landlord directly.

[AdvMurari Kumar]

Dear kasturi ji

Company has its own guest house and employee want to live there for residential purpus and want to pay rent, company is allowing for the same with issuing rent invoice

It does not fall under employee employer relationship.

[KASTURI SETHI]

Dear Sir,

Do you want to cover it under 'personal use' ?

[AdvMurari Kumar]

Yes sir

[KASTURI SETHI]

What is the exact nature of the amount recovered from the employee by the Company ? I have observed that sometimes only repair and maintenance charges are recovered from the employees and NOT the rent. Isn't it ? Pl. confirm.

[AdvMurari Kumar]

Sir it is pure rent which will be paid by employee seperatly.

[KASTURI SETHI]

Then it is taxable.

[Amit Agrawal]

Answer to question depends upon weather guest-house is 'residential dwelling' or not? Please check land / revenue records in case of any doubts.

If same is flat / bungalow owned by Co. which was hereto used as 'guest-house' (i.e. multiple people using it for short-accommodation for Co's business related works) but now onwards Co. rented such flat / bungalow to unregistered person (i.e. employee) for use as residence for one year, then, exemption from GST can be claimed by the Co in my view.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Agree. If the GH is a residential dwelling then no GST as anyway it is rented to an unregistered person (employee)

Even if employee by chance registered under GST, no liability still exists. Also refer press release of 48th Council meeting

No GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.

[KASTURI SETHI]

Guest House is integrally related to commercial activity of the company.

[Amit Agrawal]

I agree with Shri Kasturi Sethi Ji that 'Guest House is integrally related to commercial activity of the company'.

Even otherwise, activity of giving any place (residential dwelling or not) on rent - in itself - will be 'business' as defined u/s 2 (17) of the CGST Act, 2017.

@ Ms. Shilp Jain Mam,

W.r.t. giving residential dwelling on rent to an employee (who is registered person under GST), one also needs to check whether he is doing 'moonlighting' from such premises and paying gst against supplies so made. (This is fun banter .... nothing more). But, even then, liability to pay gst on service provider - under forward charge basis - will not arise if same is residential dwelling.

AI Summary

GST on rental of guest houses depends on whether the supply is a commercial rent or falls under residential dwelling exemption. GST liability turns on whether the company charges rent-if rent is charged it is a commercial supply in the course of business and taxable; if no consideration is charged (a perquisite), no GST arises. The residential dwelling exemption may apply where the premises qualify as a residence and are let to an individual for personal use, including where the occupant is registered but uses it personally; factual characterisation of the guest house versus residential dwelling is decisive.