2025 (4) TMI 1051 - AAR - GST

Taxability - service of renting out immovable property by the applicant to the Social Justice and Special Assistance Department of Maharashtra Government for running a hostel for backward class girls - time of supply - applicability of Reverse charge or Forward charge mechanism - property is jointly owned by two persons registered separately under GST all receipts should be disclosed under the applicant s GST registration number or otherwise - separate registration Under GST is required by joint name or not. Whether such service is taxable or exempt? - HELD THAT - The services provided are renting of immovable property services. These supplies of services do not involve any supply of goods and can be regarded as pure services. Further the services are given to Social Justice and Special Assistance Department of Maharashtra Government. Thus the services have been provided to the State Government. Whether the said service is in relation to any functions entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India? - HELD THAT - The renting out of immovable property 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 243 W of the Constitution and thereby are rightly eligible for exemption from GST in terms of the exemption entry at Sl. No. 3 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. As the activities related to residential accommodation of the girls or women belonging to the Backward Classes are held to be exempt from the levy of GST other questions are not applicable. Conclusion - Service provided by the applicant to the Social Justice and Special Assistance Department Government of Maharashtra qualifies to be an exempted supply of pure services vide Sl. no. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Authority for Advance Ruling (AAR) in this matter are:

(a) Whether the service of renting out immovable property by the applicant to the Social Justice and Special Assistance Department of Maharashtra Government for running a hostel for backward class girls is taxable or exempt under the GST law?

(b) If taxable, what is the time of supply for such service?

(c) If taxable, whether tax is payable under the reverse charge mechanism or the forward charge mechanism?

(d) Whether, given that the property is jointly owned by two persons registered separately under GST, all receipts should be disclosed under the applicant's GST registration number?

(e) Whether a separate GST registration is required in the joint name of the owners?

(f) Whether GST TDS is applicable on such services if taxable or exempt?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Taxability or Exemption of Renting Services to Government Hostel

Relevant Legal Framework and Precedents:

The primary legal provisions considered are Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts pure services provided to Central/State Government or local authorities by way of any activity related to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution. The Eleventh and Twelfth Schedules to the Constitution enumerate the functions entrusted to Panchayats and Municipalities respectively, including social welfare and development of weaker sections.

Entry No. 12 of the Exemption Notification also exempts services by way of renting of residential dwelling for use as residence, with specific conditions.

Precedents include the Advance Ruling by Karnataka AAR in the case of renting property to the Backward Classes Welfare Department, and the Maharashtra Appellate Authority's ruling setting aside a contrary advance ruling, both holding such renting services to government welfare departments as exempt.

Court's Interpretation and Reasoning:

The AAR examined whether the renting service qualifies as a "pure service" (no goods involved) and whether it is provided to the State Government. It was undisputed that the service is pure and provided to the Social Justice and Special Assistance Department of Maharashtra Government.

The critical question was whether the service relates to functions entrusted to Panchayats or Municipalities under Articles 243G or 243W. The Authority carefully analyzed the constitutional provisions and the Eleventh and Twelfth Schedules, which include functions such as women and child development, social welfare, and welfare of weaker sections including Scheduled Castes and Tribes.

The rented property is used as a hostel for backward class girls, a welfare activity clearly falling within the ambit of social welfare and development functions entrusted to Panchayats and Municipalities. The Authority also relied on documentary evidence including the government order sanctioning rent for the property for this purpose and the registered leave and license agreement executed between the government and the joint owners.

Application of Law to Facts:

Given that the renting service is provided to a government department for a welfare function entrusted constitutionally to Panchayats/Municipalities, the service is exempt under Entry No. 3 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017.

Treatment of Competing Arguments:

The departmental officer contended that exemption could not be granted as it was not established that the renting service was in relation to functions entrusted to Panchayats or Municipalities. The Authority rejected this argument, holding that the welfare of backward class girls through hostel accommodation is squarely covered by the functions listed in the Eleventh and Twelfth Schedules and thus qualifies for exemption.

Conclusion:

The service of renting immovable property to the Social Justice and Special Assistance Department for running a hostel for backward class girls is exempt from GST.

Issue 2: Time of Supply if Service is Taxable

Relevant Legal Framework:

Section 13(2) of the CGST Act prescribes the time of supply of services as the earliest of the date of invoice issuance, date of receipt of payment, or date when the recipient records receipt in books of account.

Court's Interpretation and Reasoning:

Since the service was held exempt, the question of time of supply does not arise.

Conclusion:

Not applicable.

Issue 3: Tax Payable Under Reverse Charge or Forward Charge if Taxable

Relevant Legal Framework:

Renting services of immovable property generally fall under SAC 997211 and attract forward charge under GST law.

Court's Interpretation and Reasoning:

Since the service is exempt, this issue is not applicable.

Conclusion:

Not applicable.

Issue 4 and 5: Disclosure of Receipts and Separate Registration for Joint Owners

The applicant withdrew these questions voluntarily and unconditionally during the proceedings. Therefore, the Authority did not adjudicate on these issues.

Issue 6: Applicability of GST TDS on the Services

Relevant Legal Framework:

Section 51 of the CGST Act mandates TDS deduction on payment made to suppliers of taxable goods or services exceeding Rs. 2.5 lakhs under a contract.

Court's Interpretation and Reasoning:

Since the renting services are exempt from GST, they do not qualify as taxable supplies. Therefore, the provisions of Section 51 regarding TDS deduction do not apply.

Conclusion:

GST TDS is not applicable on the exempted renting services provided by the applicant.

3. SIGNIFICANT HOLDINGS

"The services provided are renting of immovable property services. These supplies of services do not involve any supply of goods and can be regarded as pure services. Further, the services are given to Social Justice and Special Assistance Department of Maharashtra Government. Thus, the services have been provided to the State Government."

"Any welfare measure undertaken by the panchayats and municipalities for the social development of the girls belonging to the backward classes/Scheduled Tribes, including the residential accommodation of the girls or women, will definitely come within the ambit of the functions entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India."

"Renting out of immovable property, 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 exemption entry at Sl. No. 3 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017."

"As the activities related to residential accommodation of the girls or women, belonging to the Backward Classes are held to be exempt from the levy of GST, there is no question of application of the TDS provisions under Section 51 of CGST Act, 2017."

Final determinations:

- The renting service to the Social Justice and Special Assistance Department for running a hostel for backward class girls is exempt from GST under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

- Time of supply and tax payment mechanism questions are not applicable due to exemption.

- GST TDS under Section 51 is not applicable as the supply is exempt.