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📚 Learn/ / TAX - Supply under GST
Microlesson · 5-min read

Renting of Residential Dwelling – Exemption & Tenancy Rights

# Renting of Residential Dwelling for Residence – Exemption

## Exemption under Entry 12 of Notification No. 12/2017-CT(R)

Renting of residential dwelling for use as a residence is exempt from GST when given to:

  • An unregistered person, OR
  • A registered sole proprietor using it in personal capacity (i.e., for residence, not for business).

## Tenancy Premium / Tenancy Rights

  • Transfer of tenancy rights does NOT qualify as 'sale of land/building' under Schedule III – it is a supply of service.
  • Grant of tenancy rights in a residential dwelling for residential use to the above persons is exempt, even if consideration is in the form of:
  • Tenancy premium, OR
  • Periodic rent, OR
  • Both.
  • Outgoing tenant who surrenders tenancy rights in exchange for a share in the tenancy premium → liable to GST on such consideration.

## Summary Matrix

ScenarioTaxability
Residential dwelling rented for residence to unregistered personExempt
Residential dwelling rented for residence to registered sole proprietor (personal use)Exempt
Residential dwelling rented to other registered personTaxable under RCM
Grant of tenancy rights for residence (to exempt persons above)Exempt
Outgoing tenant surrendering tenancy rights for share of premiumTaxable (forward charge)

Worked example

### Example 1

Example 1: Landlord L rents his flat to Mr. M (unregistered, uses as residence). Monthly rent ₹25,000. → Exempt under Entry 12.

### Example 2

Example 2: L rents the same flat to ABC Pvt Ltd (registered) as guest house for employees. → Taxable under RCM (recipient pays GST).

### Example 3

Example 3: Outgoing tenant T surrenders his tenancy rights to incoming tenant N and receives ₹5 lakh as his share of tenancy premium. → T is liable to pay GST on ₹5 lakh.

⚠️ Common exam mistakes

  • Assuming ALL residential rentals are exempt – exemption applies only when use is for residence AND recipient is unregistered or registered sole proprietor in personal capacity.
  • Treating transfer of tenancy rights as 'sale of land/building' to claim Sch III non-supply – it is a supply of service.
  • Forgetting that outgoing tenants who receive a share of tenancy premium upon surrender are liable to GST.
Bare-Act text Entry 12 · Notification No. 12/2017-CT(R) · click to expand
Entry 12, Notification No. 12/2017-CT(R): Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person.
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