GST Exemption for Renting Property to Educational Institutes
The Gujarat Authority for Advance Ruling clarified that only entities with 90% government control qualify as a 'Governmental Authority' for GST exemptions.
- Ruling
- GUJ/GAAR/RULING/2019/02 dated 22.2.2019
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The National Dairy Development Board asked if it qualifies as a 'Governmental Authority'.
- The board sought a GST exemption for renting property to an educational trust.
- The authority ruled that 90% government equity or control is a mandatory requirement.
- Exemptions for renting services depend strictly on meeting this specific control threshold.
In short
The National Dairy Development Board asked the Gujarat Authority for Advance Ruling (GAAR) if it qualifies as a 'Governmental Authority' under GST law. This status is important because it determines whether renting property to an educational institute is exempt from GST. The authority examined whether the board met the strict criteria for government control required to claim this tax benefit.
What has changed
How it worked before
Many organizations assumed that being a statutory body was enough to qualify as a governmental authority, often relying on older service tax interpretations.
What has changed
The authority confirmed that an entity must prove at least 90% government participation or control to be considered a governmental authority. If your organization does not meet this 90% threshold, you cannot claim the GST exemption for renting property to educational institutes, even if you are a statutory body.
Who this affects
Statutory bodies, government-linked organizations, and trusts that rent property to educational institutions.
An example
Imagine a state-run research foundation that rents space to a local school. They might assume they are a 'Governmental Authority' because they were created by a state act. Based on this ruling, they must check if the government holds 90% or more of their equity or control. If the government only holds 50%, they likely do not qualify for the exemption and must continue charging GST on the rent.
What you should do
Review your organization's ownership structure to see if it meets the 90% government control test. Remember that this ruling only applies to the National Dairy Development Board; it is not a general law for all businesses. If you are unsure about your status, consult a tax professional before deciding to stop collecting GST on your rental income.
If you do nothing
If you incorrectly assume you are exempt and stop collecting GST, you will be liable for the unpaid tax plus interest and penalties. A tax officer may audit your records and demand the full amount of GST that should have been collected. Relying on a ruling that does not apply to your specific entity is a high-risk strategy that can lead to significant financial losses.
The terms explained
- Governmental Authority
- A specific legal status under GST law that requires an entity to be at least 90% owned or controlled by the government.
- Statutory Body
- An organization created by a specific act of Parliament or a state legislature to perform certain public functions.
- Advance Ruling
- A formal decision provided by tax authorities to a specific business regarding how GST applies to their particular situation.
The ruling in detail
Authority for Advance Ruling
M/s. National Dairy Development Board
GUJ/GAAR/RULING/2019/02 dated 22.2.2019 · Gujarat
Questions before the authority
- Whether NDDB would be qualified as ‘Governmental Authority’ from GST perspective?
- Whether renting of immovable property service provided by NDDB to an educational institute would be exempted under Sl. No. 4 of Notification No. 12/2017-Central Tax (Rate)?
Facts
The applicant is a statutory body constituted by the National Dairy Development Board Act, 1987. It has leased its premises to the Anandalaya Educational Society, a trust created by the applicant, at a nominal rent to promote educational activities. The applicant sought a ruling on whether it qualifies as a governmental authority and whether this leasing arrangement is exempt from GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Qualification as Governmental Authority | Conditional Must satisfy 90% equity or control condition for Article 243W functions |
| Exemption for renting of property | Exempt Subject to the applicant qualifying as a governmental authority |
The authority ruled that the applicant qualifies as a governmental authority only if it satisfies the condition of having 90% or more participation by way of equity or control to carry out functions entrusted to a municipality under Article 243W. Consequently, the renting service is exempt only if the applicant qualifies as a governmental authority under this interpretation.
Reasoning
The authority examined the definition of governmental authority in the Explanation to Section 2(16) of the IGST Act, 2017, as adopted by Notification No. 12/2017-Central Tax (Rate). It rejected the applicant's reliance on a Patna High Court judgment, stating that the 90% equity or control condition applies to the body. The authority concluded that the exemption is contingent upon the applicant fulfilling this specific **statutory condition** regarding participation and functional mandate.
Provisions relied on
- Section 97(2)(e) of CGST/GGST Act, 2017
- Section 2(16) of IGST Act, 2017
- Notification No. 12/2017-Central Tax (Rate)
For the practitioner
This ruling clarifies that the **90% equity or control condition** is mandatory for an entity to qualify as a governmental authority under the current GST framework. It serves as a warning that reliance on older service tax jurisprudence regarding the interpretation of 'or' in the definition is not accepted by this authority. Practitioners should ensure their clients can document the required level of government control before claiming this exemption.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/guj_02-2019_dtd.22.02.19-nddb_15-2019.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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