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2020 (11) TMI 1040 - AAAR - GSTExemption form GST - activity of renting out a residential building to a company for the purpose of long- term residential accommodation - monthly rentals received on lease of the residential building at Telangana - benefit of exemption under SI.No.13 of Notification No.9/2017 - Integrated Tax (Rate) dated 28.06.2017 - HELD THAT:- There is no dispute that this transaction is a taxable GST supply. However, what is in question is whether this transaction is exempted from GST in terms of SI. No. 13 of Heading 9963 or Heading 9972 of Notification No. 9/2017-(IT) Rate dated 28-06-2017. The Lease Deed dated 31.07.2019 stands testimony to the fact that the lessor (The Appellant) and the Lessee (M/s. D-Twelve Spaces) have entered into an agreement to let out and to take the property mentioned above on lease. As per Clause 2 (b) of Schedule II to the CGST Act, 2017 “(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.” - there is no doubt that the service rendered by the appellant is that of renting of immovable property. Whether the property being let out is a residential dwelling? - HELD THAT:- The property under question is not a home or residence being used by a family in a conventional sense or a group of members maintaining a regular house hold, but used for commercial purposes of accommodating students or working professionals in bulk numbers for a temporary period of stay. The appellant has referred to a series of definitions, and has pointed out the existence of the words “residential” or “residence” in various licenses, agreements, etc., in their grounds of appeal. But the mere existence of the word or words “residential” or “residence” does not change the character of the property under lease. Whether leased premises is used for purpose of residence only or not? - HELD THAT:- For availing the exemption from GST, SI.No. 13 of the Notification No.9/2017-IT (Rate), requires that the “Services by way of renting of residential dwelling for use as residence”. However, as seen from the Lease Deed dated 31.07.2019, the Lessee (D-Twelve Spaces Private Limited) was engaged in the business of sub-leasing property and had no intention of using the property as residence. The Notification cited, requires that the lessee use the property as “residence” in order to extend the exemption therein - But for extending the exemption from GST to the appellant, the subsequent Commercial / business activity of the lessee is of no consequence as the Notification requires the recipient of service to use such residential dwelling as residence. Even assuming, though not admitting, that the property could be treated as a residential dwelling, the fact that the Lessee (recipient of service) is not using the same as residence negates the availability of the exemption under SI. No. 13 of Notification No.9/2017-(IT) Rate - It is therefore evident that the property under lease is not a “residential dwelling” and further the said property, even though not “residential dwelling”, has not been used as “residence” by the recipient of service of renting viz the Lessee - M/s. D-Twelve Spaces Private Limited but instead actually used for the commercial interest and business of the Lessee, and hence, the exemption under SI. No. 13 of Notification No/9/2017 IT (Rate) dated 28.06.2017 would not be available to the Appellant. Thus, the activity proposed / undertaken by M/s. D-Twelve Spaces Private Limited is commercial in nature and it was advised by the Legal Experts to get the Property tax of the said area assessed under commercial head from the date of commencement of the definitive Lease Agreement - the Lease Property in question is not a “residential dwelling” and has not been “used as residence” by the recipient (the Lessee). The order of the Ld. AAR, Andhra Pradesh is hereby upheld - the supply under consideration is classifiable under 'Rental or leasing services involving own or leased non-residential property'. Such “Rental or leasing services involving own or leased non-residential property” is classified under the heading (SAC) 997212 under entry no.16 of Notification No.8/2017 Integrated Tax (Rate), Dt: 28.06.2017, and liable to IGST @ 18%. The exemption under SI. No.13 of Notification No.9/2017-IT (Rate) is not available to the Appellant.
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