TMI Blog2020 (11) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 101 of the Central Goods and Service Tax Act and the Andhra Pradesh Goods and Service Tax Act). At the outset, we would like to make it clear that the provisions of both the CGST Act and the APGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the APGST Act. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and APGST Act ] by M/s. Lakshmi Tulasi Quality Fuels (herein after referred to as the Appellant ) against the Advance Ruling No. AAR No.12/AP/GST/2020 dated 05.05.2020 issued by Authority for Advance Ruling, Andhra Pradesh. 1. Background of the Case: 1. M/s. Lakshmi Tulasi Quality Fuels, a sole Proprietorship firm of Dumpala Rama Thulasi (herein after referred to as the Appellant ) is engaged in supply of petroleum oils and lubricants. The Appellant is duly registered vide registration No.37ALMPD5548B1Z7 for payment of Goods and service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under SAC 997212 and hence under entry no.16 of Notification No.8/2017 (Integrated Tax) (Rate), Dated: 28.06.2017, liable to IGST @ 18%. b) The entry No.13 of Notification No.9/2017 (Integrated Tax) (Rate) Dated 28.06.2017 - services by way of renting of residential dwelling for use as residence is not applicable to the present case on hand. 7. Being aggrieved by the said order pronounced by the Ld. AAR, the Appellant files the present appeal on the basis of the following grounds, which are independent and without prejudice to each other. 2. Grounds of Appeal: A. Services rendered by the appellant are covered under entry no.13 of exemption notification as it fulfills all the conditions. a) It must be a service of renting: Paragraph 2(zx) of the Exemption Notification defines the term Renting of Immovable Property . It is an undisputable fact that services of renting of immovable property have de facto been provided by Appellant to the lessee covered under definition of Section 7 read with Entry No. 2 (b) of Second Schedule of CGST Act, 2017; b) The property so let out must be a residential dwelling- Residential Dwelling was defined under ers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation only - Lease Agreement dated 31' July, 2019; It is different from the hotel, motel, inn, guest house, lodge house etc. as - Legislators have themselves created a distinction between services provided by hotel, motel, inn, guest house, etc. and hostels by classifying these two services under different SAC, i.e. 996311 and 99632 - Explanatory Notes to the Scheme of Classification of Services; Based on the definitions of all these terms it can be seen that these two are totally different in the nature of services provided by them and the usage of these properties; Land zoning regulations of Telangana also provides that a hotel, lodging and boarding houses, etc. cannot be operated in residential land zone rather is permitted in the area notified as commercial use zone. Whereas the area in which the property under consideration is situated is classified as residential land use zone and as per the Zoning Regulations, 'hostels' can be operated in such zone after obtaining prior approval from competent authority (which has been duly obtained by the lessee in the present matter); Billing pattern of both the services, i.e. per day tariff as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can be sub-leased only for long stay accommodation - Clause E of Lease Agreement dated 31 st July, 2019; Furthermore, coming to the actual use of property by the Lessee, the minimum period for which such accommodation is being given by the Lessee to any working professional is for a period of 11 months while maximum duration (before renewal) being 12 months. On an average a working professional resides in the Leased Property for 11.22 months. If a person is staying at a place for minimum 11 months, it can be sufficiently called as 'long-term accommodation' or 'permanency' as against the accommodation provided by the hotels, inn, guest house, etc. where people (travellers, tourists, etc.) stay only for a few days maximum. Thus, services rendered by the Appellant are covered under Entry No. 13 of exemption notification as it fulfils all the conditions. B. Judicial pronouncements laying down some principles for this exemption under consideration (entry no. 13) a) In Re: General Manager Ordnance Factory Bhandara, cited in 2019 (26) G.S.T.L. 423 (A.A.R.- GST): Property was given as residence by employer, i.e. Applicant to its employees and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Various clauses of Lease Agreement as detailed in Para 7 of Order dated 05th May 2020 have been discussed by Ld. AAR: Regarding this contention of Ld. AAR, it is submitted that - a. as per the State's guidelines, the tariff governing water charges in hostels, paying guest (PG) accommodation will be that of commercial irrespective of the nature/land use zone of property in which such connection is applied. These tariffs (residential/commercial) in no way governs/depicts the actual nature of property; b. For reference, Delhi Government in the year 2017 vide Order bearing No. F.11/90/2017/Power/3687 dated 21' December 2017 extended the provisions of Electricity subsidy to individual lawyers having their chambers inside all the Court Complexes in NCT of Delhi through a Special Subsidy Scheme. Through this Scheme, such Lawyers Chambers shall be charged tariff from erstwhile Non-Domestic tariff category to Domestic tariff category for F.Y. 2017-18 w.e.f. 01' October, 2017. It cannot be said that subsequent to this Order, Lawyers chambers inside the Court Complexes are covered under residential zone or will be called as residential property since electricity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited (Lessee). Secondly, there is a separate and distinct supply of sub-leases / sub-licensing by M/s. D-Twelve Spaces Private Limited to various working professionals, students, etc. What is submitted for advance ruling is whether the supply of service (Leasing) between the Appellant (Lessor) and M/s. D-Twelve Spaces Private Limited (Lessee) is eligible for exemption under SI. No.13 of Notification No.9/2017-(IT) Rate dated 28.06.2017. The second transaction is not under consideration. 4.2.1 As per the Lease Deed executed by the appellant with M/s. D-twelve Spaces Private Limited, the appellant has let out her building at Plot No.67, Padmashree Gardens, Vattinagulapally, Rajendra Nagar, R.R. Nagar, Telangana on a monthly rental basis of ₹ 7,20,000/- that consists of 73 rooms with all amenities like exhaust fans, geysers, lights and fittings, sanitary fittings, etc., provided by the Lessor and the lessee shall pay all operational costs to the lessor based on the invoice or the bill issued by the relevant authorities. As per Clause 13, the Lessee shall have the right to engage with third-party service providers for all activities required for the purpose includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property; As such, there is no doubt that the service rendered by the appellant is that of renting of immovable property. 4.5 Next issue to be examined is whether the property being let out is a residential dwelling. 4.5.1 The term 'Residential dwelling' is not defined anywhere in the Act, therefore we go by common parlance and general understanding of the term: A Residential dwelling unit means a building or structure or part of a building or structure that is used for a home or residence by one or more persons who maintain a household. It also means a mobile home regardless of ownership of the land. It is evident from the above reading, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be liable to tax accordingly. 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. The fact that the lessee has taken the property on Lease for pure commercial and business purposes with no intention to use the same as residence is borne out by the following clauses of the said Lease Deed: (i) Clause 10.3 Municipality Costs and Taxes: ...Lessee alone shall be liable to make the payment of all taxes, cess, assessments, duties and other charges of similar nature applicable on the business carried by the Lessee . the relevant extract is reproduced for ready reference. 10.3. Subject to Clause 10.1 (Municipality Costs and Taxes), the Lessee alone shall be liable to make the payment of all taxes, cess, assessments, duties and other charges of similar nature applicable on the business carried by the Lessee on the Total Property. (ii) Clause 12 Right to Sub-Lease: ...Lessee shall have the sole and absolute right to charge rent or/and premium from such sub-Leases ... further clause 12.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction and use of the Lease Property with the clear intent to put it to commercial use. 4.7.1 One of the documents submitted by the appellant is a copy of Provisional Trade License for the Year 2019-20 issued under Section 521 622 of HMC Act, 1995, by Greater Hyderabad Municipal Corporation bearing Tran No XXXXX as Annexure I. While the address of the Property is the same as that mentioned in the Lease Deed, however, the name to whom the Provisional Trade License has been issued is someone else other than the Appellant and the Lessee. Notwithstanding that, this License reveals that the property so constructed by the appellant and let out to lessee has been put to commercial use only. 4.7.2 The commercial nature of the intended use is also supported by the Legal Due Diligence Report given by M/s. Lex Chambers and Advocates, which was relied upon by the Appellant in their Appeal. In clause (d) of para VII of the said Report, it is stated as follows: d. In light of the aforementioned, a hostel can be operated from the Said Area. However, the permissions, approvals and licenses for running a hostel from the Said Area must be obtained from all concerned authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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