Issue related to taxability of �tenancy rights� under GST- Regarding.

Last updated: 02 May 2018

Notice Date : 05 February 2018

Circular No.44/18/2018-CGST

F. No. 341/28/2017-TRU

Government of India

Ministry of Finance

Department of Revenue

Tax Research Unit

*****

New Delhi, the 2nd May, 2018

To,

The Principal Chief Commissioner/Chief Commissioners/ Principal Commissioner/

Commissioner of Central Tax (All) /

The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Subject: Issue related to taxability of ‘tenancy rights’ under GST- regarding

Doubts have been raised as to,- (i) Whether transfer of tenancy rights to an incoming tenant, consideration for which is in form of tenancy premium, shall attract GST when stamp duty and registration charges is levied on the said premium, if yes what would be the applicable rate? (ii) Further, in case of transfer of tenancy rights, a part of the consideration for such transfer accrues to the outgoing tenant, whether such supplies will also attract GST?

2. The issue has been examined. The transfer of tenancy rights against tenancy premium which is also known as “pagadi system” is prevalent in some States. In this system the tenant acquires, tenancy rights in the property against payment of tenancy premium(pagadi). The landlord may be owner of the property but the possession of the same lies with the tenant. The tenant pays periodic rent to the landlord as long as he occupies the property. The tenant also usually has the option to sell the tenancy right of the said property and in such a case has to share a percentage of the proceed with owner of land, as laid down in their tenancy agreement. Alternatively, the landlord pays to tenant the prevailing tenancy premium to get the property vacated. Such properties in Maharashtra are governed by Maharashtra Rent Control Act, 1999.

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