The Delhi High Court clarified that renting or leasing of a residential dwelling for use as a residence is exempt from the scope of GST. Accordingly, no GST can be included as part of the rent for the purposes of chargeability of stamp duty. Reference was made to Entry No. 12 of the Central Tax Notification No. 12/2017.
The Court also reiterated that the GST payable by the lessee cannot be treated as part of the rent for the purpose of chargeability of stamp duty, and the lease deed has to be classified under Section 6 and Article 35 of the Indian Stamp Act, 1899. Hence, the view regarding the deficit payment of stamp duty is misconceived, and the Court directed the Stamp Collector (respondent) to refund the amount of Rs. 2.58 lacs (including deficit stamp duty and penalty), within a period of six weeks.
A Single Judge Bench of Justice Sachin Datta refers to the Circular dated May 02, 2018, bearing No. 44/18/2018-CGST issued by the Tax Research Unit, Department of Revenue, Ministry of Finance, where it was stipulated that the activity of transfer of ‘tenancy rights’ is squarely covered under the scope of supply and taxable per se.
The Bench explained that the transfer of tenancy rights to a new tenant against consideration in the form of a tenancy premium is taxable. However, renting of residential dwellings for use as a residence is exempt as per Sl. No. 12 of notification No. 12/2017-Central Tax (Rate).
Briefly, the petitioner entered into a lease deed with Optimum Therapeutics P Ltd. in respect of a property, which unequivocally stipulated that the property shall be used solely for residential purposes. Later, the lease deed was impounded on the alleged ground of deficient stamp duty, due to the purported applicability of GST and inclusion thereof for purposes of stamp duty computation.
The petitioner, therefore, approached the High Court seeking the quashing of the order passed by the Collector of Stamps, Govt. Of NCT of Delhi, whereby the petitioner was directed to pay the alleged deficient stamp duty of Rs. 51,740 along with a penalty of Rs. 2.06 lacs.
Appearances:
Advocates Amish Tandon and Charchika Yadav, for the Petitioner/ Taxpayer
Advocates Lalltaksh Joshi and Ananya Sanjiv Saraogi, for the Respondent/ Revenue
