2020 (4) TMI 692 - AAR - GST

Group of lessors - Renting of residential premises - Exemption prescribed under entry number 13 of notification no. 9/2017- integrated tax (rate) dated. 28 th June, 2017 - Levy of GST while issuing the invoice for the lease service to M/s. Dtwelve Spaces Pvt. ltd. - HELD THAT - It is clear that the applicant is not providing the service in individual capacity to the lessee, but as a part of the group of lessors. The applicant has not provided any details of registration or constitution of the group, whether they have entered into a partnership or association etc. and hence the taxability of the transaction needs to be examined in this background. Entry 13, Heading 9963 or Heading 9972, is related to renting of residential dwelling for use as residence - The contract of the applicant group with the Company is verified and found that what is given is an immovable property consisting of only rooms with attache toilets as per the Layout of the leased premises annexed to the Lease agreement and does not fit into the meaning of a dwelling which means a house. They are like hotel rooms and the entire leased premises has 42 rooms, which can by no imagination be termed as a residential dwelling. The exemption prescribed under entry no. 13 of N/N. 9/2017 - Integrated tax (Rate) dated 28th June 2017 cannot be sought and the lessors (as an entity) have to charge GST while issuing the invoice for the lease services to M/s. DTwelve Spaces Pvt. Ltd, provided they are registered under the GST Act - The lease services does not fall under the exemption Services by way of renting of residential dwelling for use as residence as listed in entry 13 of Notification No. 9/2017 - Integrated tax (Rate) dated 28th June 2017.

Summary

Issues Involved:
1. Whether exemption under entry no. 13 of notification no. 9/2017-integrated tax (rate) dated 28th June, 2017 can be claimed, and lessors need not charge GST for lease services.
2. Whether lease service qualifies as "Services by way of renting of residential dwelling for use as residence" for exemption.

Analysis:
1. The applicant, a proprietary concern providing residential accommodation to students, sought advance ruling on exemption under entry no. 13 of a notification. The applicant, along with others, leased out a residential complex to a company providing student accommodation. The applicant argued that renting immovable property is a service under CGST Act Schedule II and claimed exemption under the notification. The company believed that no GST should be charged by lessors for lease services.

2. During the personal hearing, it was noted that the lessors collectively leased their premises to the company under a single agreement. The agreement indicated the pooling of properties by lessors and a common consideration. The entire property was let out, allowing sub-leasing. The lessors were seen as a group providing leasing services for business or commerce, not individually. Hence, the nature of the transaction was considered a supply of service by the group to the company.

3. The ruling authority examined the lease agreement and found that the leased premises did not fit the definition of a residential dwelling. The 42 rooms leased were more akin to hotel rooms than a residential dwelling. Therefore, the exemption for renting residential dwellings did not apply to the transaction. The second question regarding the lease service's classification under the exemption was also answered in the negative.

Conclusion:
The ruling concluded that the lessors, as an entity, must charge GST for lease services to the company, and the lease services did not qualify for exemption under the specified entry.