Taxability of surrender of tenancy rights

[Prateek Jaju]

A religious trust, landowner, has rented its residential property to an individual for long term lease basis (widely known as pagdi system).

Now, the tenant is selling its tenancy rights to another individual.

As per the agreement, the new buyer will be transferring half amount to landowner and half amount to old tenant.

Will the receipt in the hand of landowner will attract GST ?

[GUNASEKARAN K]

Yes GST at 18% applicable on Real estate services involving owned or leased property (SAC 99721)

Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable and hence GST is payable on the same.

Renting of residential dwelling for use as a residence is exempt.

Services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST.

[KASTURI SETHI]

Agree with Sh.Gunasekaran K Ji. Also read Board's circular in this context.

Tenancy rights taxability under GST — Clarification

Circular No. 44/18/2018-CGST, dated 2-5-2018

AI Summary

Transfer of tenancy rights: premium received for assignment or surrender is taxable service; residential rent remains exempt.
Payment characterised as tenancy premium for transfer or surrender of tenancy rights is a taxable supply treated as real estate services, whereas renting a residential dwelling for residential use is exempt; an outgoing tenant's surrender of tenancy rights for consideration is a taxable service, and a landowner's receipt as part of a tenancy premium payable on transfer remains taxable.