2018 (9) TMI 1340 - AAAR - GST

Levy of GST - Rent payable by a Hospital - whether GST is leviable on the rent payable by a hospital supplying lifesaving services (cardiology and emergency services)? - input tax credit - challenge to AAR Decision. Held that - The healthcare services which the appellant provides as his outward supply, is exempted from GST by virtue of entry Sl. No 74 of Notification No 12/2017 CT (R) dated 28.06.2017 as amended. No GST is payable on outward healthcare supplies, as these are exempted supplies - Renting in relation to immovable property has been defined under the definition clause 2(zz) of the CGST Notification No 12/2017- Central Tax (Rate) dated 28-06-2017 and KGST Notification (12/2017) No FD 48 CSL 2017 Bengaluru dated 29-06-2017. By virtue of these Notifications, services by way of renting of residential building for use of residence only is exempt from levy of GST vide Sl.No.12 of the said Notifications. In terms of CGST Notification No 11/2017 - Central Tax (Rate) date 28-06-2017 and KGST Notification (11/2017) No FD 48 CSL 2017 Bengaluru dated 29-06-2017. GST is leviable @ 18% (CGST @ 9% SGST @ 9%) on the rent paid / payable for premises taken on lease by the Applicant for running the hospital vide Sl.No.16 (Real Estate Services) of the said Notifications. Input tax credit - Held that - There was no question raised before the AAR seeking a ruling on the aspect of ITC used in providing exempted supplies and refund of Input Tax credit. This issue has been raised for the first time before us in appeal - there can be no appeal on issues on which no ruling was sought before the Authority for Advance Ruling under section 97 of the Act and which was not examined by the AAR. Ruling - The AAR decision upheld; that is; GST is leviable on the rent paid / payable for premises, taken on lease by the applicant.

Summary

Issues involved:
- Whether GST is leviable on the rent payable by a hospital providing lifesaving services.
- Whether input tax credit of GST paid on rent can be availed if the output supply is not taxable.
- Whether there is a provision for refund of input tax credit on rent paid for the premises.
- Whether the Appellate Authority for Advance Ruling can pass a ruling on the applicability of Rule 89(h) of the KGST Act.

Analysis:

Issue 1: GST on rent for hospital services
The Appellant, a Cardiology Specialized Hospital, appealed against the ruling that GST is leviable on the rent paid for the premises taken on lease. The Appellant argued that since their healthcare services are exempted from GST, the rent should also be exempt. However, the Authorities upheld the ruling citing specific Notifications levying GST on such rent.

Issue 2: Input tax credit on non-taxable output supply
The Appellant contended that as their output supply is not taxable, they cannot avail input tax credit on the GST paid for rent. They sought a refund of the input tax credit. The Authorities clarified that there is no provision for refund in such cases, as the purpose of paying GST on rent does not serve any specific purpose due to the exempted nature of the output supply.

Issue 3: Provision for refund of input tax credit
The Appellant raised concerns about the lack of provision for refund of input tax credit on rent paid for the premises. They requested the Authorities to pass a ruling on the applicability of Rule 89(h) of the KGST Act to pursue the refund. However, the Authorities dismissed this plea, stating that the issue was not raised before the Advance Ruling Authority and hence cannot be considered in the appeal.

Conclusion:
The Authorities upheld the original ruling that GST is leviable on the rent paid for the hospital premises, despite the healthcare services being exempted from GST. They dismissed the appeal by the Appellant, stating that there is no provision for refund of input tax credit on rent paid for non-taxable output supplies. The plea for a ruling on the applicability of Rule 89(h) of the KGST Act was also rejected as it was not raised before the initial Authority for Advance Ruling.