2020 (6) TMI 769 - AAR - GST

Exemption from GST - amount received for leasing residential hostel rooms - exemption under Sl.No.14 (Heading 9963) or under Sl.No.12 (Heading 9963) of Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 as amended upto 25.01.2018 - HELD THAT - Sl. No. 14 of Heading 9963 describes Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent as nil rated' - the applicant, who is the service provider, does not satisfy the above conditionalities. Ile is neither registered under Hotel, Inn, Guest House, Club or Campsite, by whatever name it is called, nor providing services to the students under the style and name of his registered trade name with a declared tariff of a unit of accommodation below one thousand rupees per day or equivalent to avail the exemption under the notification. The service recipient, i.e., the Lessee in this regard, further sublets the property to the Narayana Educational Society, which in return uses the facility to accommodate their students. Whether amount received for leasing residential hostel rooms is exempt under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended upto 25.01.2018? - HELD THAT - In the instant case, it is evident from the above reading, that the property under question is not a home or residence being used by a family or group of a members maintaining a regular house hold, but used for commercial purposes of accommodating students in bulk numbers. A temporary stay of the students will not merely qualify the purpose for use as residence and hence it is not qualified to be listed under heading 9963 or 9972. The activity under question is non residential property rented out for commercial activity and supply of such services, in the facts and circumstances of the case, 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.

Summary

Issues Involved:
1. Whether the amount received for leasing residential hostel rooms is exempt under Sl.No.14 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.
2. Whether the amount received for leasing residential hostel rooms is exempt under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.

Issue 1: Exemption under Sl.No.14 (Heading 9963) of Notification No.12/2017-Central Tax (Rate)
The applicant contended that the leasing of hostel rooms should be exempt under Sl.No.14 of Notification No.12/2017-CT (Rate), which pertains to services by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff of a unit of accommodation below one thousand rupees per day.

Upon examination, it was found that the applicant, who is the service provider, does not meet the conditions specified. The applicant is neither registered under any of the categories mentioned (hotel, inn, guest house, club, or campsite) nor providing services to students under his registered trade name with a declared tariff of a unit of accommodation below one thousand rupees per day. Instead, the property is leased to M/s. Nspira Management Services Private Limited, which further sublets it to Narayana Educational Society for accommodating students. Therefore, the exemption under Sl.No.14 does not apply.

Issue 2: Exemption under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate)
The applicant also sought exemption under Sl.No.12 of the same notification, which exempts "Services by way of renting of residential dwelling for use as residence."

The property in question, consisting of 170 hostel rooms with attached bathrooms, is leased to M/s. Nspira Management Services Private Limited for commercial purposes, which in turn subleases it to Narayana Educational Society for student accommodation. The term "residential dwelling" is not defined in the Act, but generally, it refers to a building used as a home or residence by individuals maintaining a household.

In this case, the property is used for commercial purposes to accommodate students in bulk numbers, which does not qualify as a "residential dwelling for use as residence." The temporary stay of students does not meet the criterion of "use as residence." Therefore, the activity is classified as "Rental or leasing services involving own or leased non-residential property" under Service Code (Tariff) 997212 and is taxable at the rate of 18% IGST.

Ruling:
1. The amount received for leasing residential hostel rooms is not exempt under Sl.No.14 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.
2. The amount received for leasing residential hostel rooms is not exempt under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.