IN RE: M/S. LAKSHMI TULASI QUALITY FUELS (PROPRIETOR DUMPALA RAMA TULASI) - 2020 (7) TMI 390 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH
Facts of the case: 1) The applicant is in business of supplying petroleum oils and lubricants and is a registered taxpayer.
2) Applicant is sole owner of building (Lessor) which he has leased out to D-Twelve Spaces Private Limited (being Lessee).
3) Lessee is a registered taxpayer and is inter alia engaged in business of running, managing and operating the day to day affairs of residential premises and sub lease of such residential premises to individuals (including students) for the purpose of long stay accommodation.
4) As per the lease agreement, in consideration of grant of lease, the lessee is required to pay to the applicant a monthly rent of ₹ 7,20,000/- and all operational costs such as electricity, telecom and water charges as per the actual meter reading or based on the invoice or the bill issued by the relevant authorities.
5) As per the terms of lease agreement, the lessee has right to sub lease the aforesaid property during the lease term to any third party with prior intimation to the applicant for the purpose of long stay accommodation.
Applicant's interpretation of Law: As per applicant, he should be covered under entry no.13 of exemption N/No.9/2017 dated 28.06.2017 i.e. GST rate of tax is Nil for services by way of renting of residential dwelling for use as residence when these conditions are cumulatively fulfilled:
a) Service is by way of renting of residential dwelling
b) Residential dwelling should be for use as residence.
Findings and conclusion by authority:
1) There are 73 rooms in the building with all amenities like exhaust fans, geysers, lights and fittings, curtain rods, sanitary fittings, curtain rods etc., provided by the lessor.
2) The Lessee shall have the right to engage with third-party service providers for all activities required for the purpose including food catering, hospitality, security, cleanliness, event organization, transportation, management and supervision of the Total Property as deemed necessary by the Lessee for the Purpose.
3) The Lessee shall have the right to deploy branding strategies on the Total Property and use all entrances, exterior walls, areas and structures on the total property, at its own costs and expense, to put up nameplates, hoardings, flyers, boards and and other signage or advertisements (Signage) for this Purpose.
Conclusion: Te authority held that considering the number of rooms and amenities provided in it, boarding and hospitality services extended to the inmates and all the clauses of the agreements discussed above, it appears that the building was constructed for the purpose of running a lodge house. It is clear that the lessee is engaged in commercial activity of renting of rooms in the dwelling and providing boarding and hospitality services to the inmates.
2) Hence, above services are classifiable as Rental or leasing services involving own or leased non-residential property" under Service Code (Tariff) 997212. It is taxable in the hands of the lessor and is liable for IGST at the rate of 18 percent.
