2022 (4) TMI 630 - AAAR - GST

Exemption from GST or not - renting out of immovable properties to the Social Welfare Department of Maharashtra Govt, for residential accommodation of girls from the backward class/Scheduled Tribes - whether service in relation to any function entrusted upon the panchayat under Article 243G of the Constitution or any function entrusted upon the municipality under Article 243 W of the Constitution, or not - applicability of TDS provisions - applicability of TDS notification issued under section 51 would be applicable for deduction of TDS, as appellant is not registered under GST - refund of TDS - HELD THAT - On perusal of the Article 243G and 243 W of the Indian Constitution along with the eleventh and twelfth Schedule to the Constitution, it is seen that panchayats and municipalities have been entrusted with the responsibilities of planning and implementation of the various schemes for ensuring social justice and development of the weaker section of the society, which clearly includes the girls and women from the backward class/Scheduled Tribes. Thus, any welfare measure undertaken by the panchayats and municipalities for the social development of the gills belonging to the backward classes/Scheduled Tribes, including the residential accommodation of the girls or women, will definitely come under the ambit of the responsibilities/functions entrusted to panchayats and municipalities. It can be safely interpreted that entry at SI. No. 3 of the Exemption Notification No. 12/2017/C.T. (Rate) dated 28.06.2017 has a very wide connotation and coverage. Since, it has been established that the activities related to residential accommodation of the girls or women, belonging to the Backward Class/Scheduled Tribes, will definitely come under the ambit of the responsibilities/functions entrusted to panchayats and municipalities, therefore, it can be safely concluded that in the instant case, pure services, i.e., renting out of immovable properties, provided by the Appellant to the State Government, will definitely be construed as an activity in relation to the function entrusted to a Panchayat under article 243G of the Constitution, or in relation to the function entrusted to a Municipality under article 243W of the Constitution, and thereby, are rightly eligible for exemption from GST in terms of the aforesaid exemption entry at SI. No. 3 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. Once, it has been concluded that the impugned activity undertaken by the Appellant is eligible for exemption from GST, there is no point discussing the aggregate turnover of the Appellant which include the rental income received from Social Welfare Department, Govt, of Maharashtra as the issue before us was to determine whether the services provided to the Social Welfare Department, Government of Maharashtra for residential accommodation of underprivileged girls is exempt from GST and not the liability of the Appellant to take GST registration attributing to his annual aggregate turnover - Further, once the subject transaction has been held to be exempt from the levy of GST, there is no question of application of the TDS provisions made under Section 51 of the CGST Act, 2017. Thus, it is concluded that the impugned services of the renting out of immovable properties provided by the Appellant to the Social Justice Department of the Government of Maharashtra will be exempt from the levy of GST in terms of SI. No. 3 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, and accordingly, the TDS provisions made under section 51 of the CGST Act, 2017, will not be applicable therein.

Summary

Issues Involved:
1. Exemption from GST for services provided to the Social Welfare Department.
2. Applicability of TDS provisions under Section 51 of the CGST Act, 2017.
3. Requirement for GST registration based on the aggregate turnover of co-owners.
4. Entitlement to refund of TDS deducted.

Issue-wise Detailed Analysis:

1. Exemption from GST for services provided to the Social Welfare Department:

The Appellant provided services of renting out immovable property to the Social Welfare Department, Government of Maharashtra, for residential accommodation of underprivileged girls. The Appellant argued that these services should be exempt from GST under Notification No. 12/2017-C.T. (Rate), which exempts pure services provided to the government in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution.

The Appellate Authority examined Articles 243G and 243W, along with the Eleventh and Twelfth Schedules of the Indian Constitution, which include functions related to social welfare and the development of weaker sections, including Scheduled Tribes. It was concluded that the services provided by the Appellant fall under these functions, thus qualifying for exemption from GST.

2. Applicability of TDS provisions under Section 51 of the CGST Act, 2017:

The Appellant contended that TDS provisions should not apply as the services provided are exempt from GST. The MAAR had previously ruled that TDS provisions would apply. However, the Appellate Authority found that since the services are exempt from GST, the TDS provisions under Section 51 of the CGST Act, 2017, would not be applicable. The decision was supported by the fact that the Appellant is unregistered under GST due to their turnover being below the threshold limit.

3. Requirement for GST registration based on the aggregate turnover of co-owners:

The Appellant, along with other co-owners, jointly owned the property and received rental income. The total rental income exceeded the GST registration threshold, but the individual share of each co-owner did not. The Appellant argued that each co-owner should be considered separately for GST registration purposes.

The Appellate Authority agreed, citing previous rulings that co-owners should not be treated as an association of persons if their income is separately ascertainable and assessed individually for income tax. Therefore, each co-owner's turnover should be considered separately, and the Appellant, whose turnover is below the threshold, is not required to register under GST.

4. Entitlement to refund of TDS deducted:

The Appellant sought clarity on whether they would be entitled to a refund of TDS deducted by the Social Welfare Department. The MAAR had refrained from answering this question, stating it was outside the scope of Advance Ruling provisions under Section 97 of the CGST Act, 2017.

The Appellate Authority did not explicitly address this issue in their final order but implied that since the services are exempt from GST and TDS provisions do not apply, any TDS deducted may be subject to refund under the appropriate provisions of the GST law.

Conclusion:

The Appellate Authority set aside the MAAR's ruling, holding that the services provided by the Appellant to the Social Welfare Department are exempt from GST under Notification No. 12/2017-C.T. (Rate). Consequently, TDS provisions under Section 51 of the CGST Act, 2017, are not applicable. The Appellant is not required to register under GST as their individual turnover does not exceed the threshold limit. The appeal filed by the Appellant was allowed.