2022 (6) TMI 193 - AAR - GST

Exemption from payment of GST - monthly license fee to be received by them on the proposed letting out on Leave and License Basis of their residential building to M/s. Life Insurance Corporation of India for residential purpose of their staff - monthly license fee to be received by them on the proposed letting out on Leave and License Basis of their residential building - SI. No. 12 of the Notification No.12/2017-CT(Rate), dated 28-6-2017 and corresponding S.No.12 of Notification No. 12/2017-ST(Rate) under Maharashtra Goods and Service Tax Act, 2017 - HELD THAT - In the subject case, the supply of service pertains to the Real Estate Sector and can be called Real Estate Services (9972), where such services i.e rental/leasing services are involving own residential property (997211) where the owner i.e. the applicant, of the residential property is supplying Real Estate Service involving its own property - As per the schedule entry of Notification No.12/2017-CT (Rate) dated 28.06.2017 the residential dwelling/property must be given on rent for use as a residence. The entry does not mention as to whom the said services to be supplied. The exemption given in Sr. No. 12 mentioned above is qua the supply of service and not qua the recipient of the supply. We therefore agree with the contention of the applicant that, Serial No.12 of Notification No.12/2017-CT (Rate) and the corresponding Notification under MGST Act, 2017, is very clear wherein it gives exemption to the nature of the property and its usage and not by the status of recipient - It is a fact that the impugned residential properties will be used as residences by the staff of LIC and we therefore hold that, such services will be covered under the above mentioned Sr. No. 12 of Notification No.12/2017-CT (Rate) dated 28.06.2017 as amended. Further, if a residential property was either used or let out for commercial purposes then it would be classified as a service provided and attract GST. Only property let out for residential purposes will be exempt from the GST ambit. The GST applicability is not decided by the nature of the property but by the purpose for which it is used. To reiterate, it is not the nature of the property but the nature of the end use that will determine whether it is a commercial rent or residential rent. The ruling given by the West Bengal Authority for Advance Ruling, Goods and Services Tax, in the case of IN RE M/S. BORBHETA ESTATE PVT. LTD. 2019 (6) TMI 1340 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL ie referred, where it was held that the Applicant's service of renting/leasing out the dwelling units for residential purpose was, exempt under Si No. 12 of the Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017, as amended from time to time and the Applicant, therefore, was not liable to pay tax on supply of such service. Thus the Applicant is eligible for the exemption from payment of GST on the monthly license fee to be received by them on the proposed letting out on Leave and License Basis of their residential building to M/s. Life Insurance Corporation of India for residential purpose of their staff, as per SI. No. 12 of the Notification No.12/2017-CT(Rate), dated 28-6-2017 and corresponding SI. No. 12 of Notification No.12/2017-ST(Rate) under Maharashtra Goods and Service Tax Act, 2017.

Summary

Issues Involved:
Whether the applicant is eligible for exemption from GST on the monthly license fee for letting out residential building to a commercial organization for staff use.

Analysis:
Issue 1: Interpretation of Notification No.12/2017-CT (Rate)
The applicant sought an advance ruling on the exemption from GST on the monthly license fee for letting out residential premises to a commercial entity for staff use. The applicant argued that the exemption under the notification is based on the nature and usage of the property, not the status of the recipient. The applicant highlighted the residential nature of the property and the specific restriction on commercial use in the agreement. The Authority agreed with the applicant, emphasizing that the exemption applies to the nature and usage of the property, not the recipient's status. The Authority also considered a letter from the commercial entity confirming the residential use by its staff members.

Issue 2: Jurisdictional Officer's Contention
The jurisdictional officer contended that the commercial organization's staff using the residential premises for work purposes constitutes commercial use, thus making the exemption inapplicable. However, the Authority found the officer's reasoning lacking, noting the absence of logical and legal arguments to support the claim. The officer's assertion that providing residential quarters to staff increases profits was not substantiated. The Authority rejected the officer's argument, emphasizing the distinction between commercial and residential use based on the purpose of the property.

Issue 3: Comparison with West Bengal Authority for Advance Ruling
The Authority referenced a ruling by the West Bengal Authority for Advance Ruling in a similar case involving leasing residential units to individuals and a commercial entity. The ruling emphasized that the exemption under the notification applies if the dwelling unit is used for residence, regardless of the recipient. The Authority applied the same reasoning to the present case, drawing parallels with the West Bengal ruling to support its decision.

Conclusion:
After detailed deliberations, the Authority concluded that the applicant is eligible for the exemption from GST on the monthly license fee for letting out residential premises to a commercial organization for staff use. The decision was based on the nature and usage of the property for residential purposes, as specified in the relevant notification. The ruling aligned with the interpretation of the notification's provisions and rejected the jurisdictional officer's arguments lacking logical and legal basis. The Authority's decision was supported by a reference to a similar ruling by another jurisdiction, reinforcing the applicability of the exemption in such cases.