2018 (10) TMI 1875 - AAR - GST

Exempt from GST or not - Residential Dwelling Unit taken on Lease from Various Individuals/Owners for Sub Leasing and the same Residential Dwelling unit to Corporates as well as Individuals for Residential Purposes along with various amenities such as Furniture, Appliance, Cleaning, Security, Pest Control, AC Service etc. - Entry No. 12 of N/N. 12/2017- Central Tax (Rate) dated 28th June 2017 - HELD THAT - it is understood that the First Lease agreement between the owner and the applicant is in the nature of only a right given to the applicant for further sub-letting the property, though with a condition that it can be sub-letting only for residential purpose - It is the second Lease agreement (Sub-Lease) which is between the applicant and the actual user of the property which is for residential purpose. This agreement, to our understanding qualifies under service code 997211(Rental or leasing services involving own or leased residential property) and falls under the said entry 12 of the notification in question - The First Lease agreement between the owner and the applicant, at the most can be termed as property management services falling under service code 997221. The third Lease relating to services is rightly understood by the applicant as taxable and hence out of the purview of the said entry 12 of the above notification.

Summary

Issues:
1. Interpretation of Entry No. 12 of Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 regarding GST exemption for renting residential dwelling units.

Analysis:
1. Factual Background:
- The Applicant leases residential dwelling units and sub-leases them to individuals/corporates with various amenities.
- Amenities provided include housekeeping, furniture, appliance, security, pest control, etc.

2. Question for Advance Ruling:
- Whether leasing residential units along with amenities qualifies as an exempt supply under Entry No. 12 of the Notification.

3. Applicant's Interpretation:
- Applicant believes leasing residential units for residence is exempt under SAC Code 9972, while maintenance services are taxable at 18% under SAC Code 9987.

4. Record of Personal Hearing:
- Hearing attended by Applicant's representatives who submitted lease agreements.
- Question referred pertains to the applicability of Entry 12 of the Notification on lease agreements.

5. Discussion and Finding:
- Applicant leases from property owners and sub-leases to individuals/corporates with amenities.
- Three segments identified: lease with property owners, sub-lease to occupants, and maintenance services.
- Applicant pays GST only on services agreement, claiming exemption for property lease under Entry 12.
- First lease agreement termed as property management services, not covered under Entry 12.
- Second lease agreement with actual users qualifies under service code 997211 and falls under Entry 12.

6. Advance Ruling:
- First lease agreement categorized as property management services and not exempt under Entry 12.
- Second lease agreement with actual users qualifies under service code 997211 and falls under Entry 12.
- Ruling ordered accordingly.