2020 (9) TMI 354 - AAAR - GST

Levy of GST - Lease Service - Benefit of exemption N/N. 9/2017-integrated tax (rate) dated. 28th June, 2017 - whether the lessors (here Ambrish Vasudeva and 4 others) need not charge GST while issuing the invoice for the lease service to M/s. DTwelve Spaces Pvt ltd.? - whether falls under the Exemption prescribed and can be described as Services by way of renting of residential swelling for use as residence as listed in the aforesaid Notification? - challenge to AAR decision. HELD THAT - The impugned property was constructed as Hostel building. The project description in the sanctioned plan submitted to us indicates that the plan is for the construction of a hostel building. Can a hostel building be called as a residential dwelling? A common understanding of a hostel is that of an establishment which provides inexpensive accommodation to specific categories of persons such as students, workers, travellers. On the other hand, a common understanding of the term residential dwelling is one where people reside treating it as a home. We find that the Appellant has constructed the building with the intention of providing hostel accommodation which is more akin to sociable accommodation rather than what is commonly understood as residential accommodation. It is concluded that the impugned property cannot be termed as residential dwelling . Once the impugned property is not a residential dwelling, the exemption under Sl.No 13 of Notification No 09/2017-IT (Rate) dt 28.06.2017 will not apply to the renting/leasing of such property. Time Limitation - HELD THAT - In this case, the application was filed manually on 6th December 2019 and the ruling should have been pronounced on or before 5th March 2020. No doubt the ruling given by the Authority has been passed after the time period stipulated under the statute. However, that does not render the ruling null and void or unsustainable. An order which is passed without jurisdiction can be held to be null and void and unsustainable. However, an order suffering from illegality or irregularity of procedure cannot be termed in executable - In this case, the Authority was well within its jurisdiction to pass a ruling on the subject matter. Not adhering to the time limit in passing an order can be termed as an irregularity in procedure which can be set right in appeal proceedings. The question of charging or not charging GST for the transaction between the applicant and the Company does not arise as the applicant himself is not effecting any supply of service to the Company directly - AAR decision upheld.

Summary

Issues Involved:
1. Whether the leased property qualifies as a "residential dwelling" under GST law.
2. Whether the exemption under Entry No. 13 of Notification No. 09/2017-IT (Rate) dated 28.06.2017 applies to the lease service.
3. Validity of the ruling passed beyond the prescribed time limit.
4. Whether the appellant individually provides the leasing service or as part of a group.

Detailed Analysis:

1. Qualification of the Property as a "Residential Dwelling":
The appellant argued that the property leased out qualifies as a "residential dwelling" and should be exempt from GST under Entry No. 13 of Notification No. 09/2017-IT (Rate). They submitted documents such as the sanctioned building plan and Katha extract to substantiate that the property is residential. However, the appellate authority noted that the property was constructed as a hostel building, which is typically not considered a residential dwelling in the common understanding. A residential dwelling is generally understood as a place where people reside treating it as a home, while a hostel provides sociable accommodation for specific categories like students or workers. Therefore, the property does not qualify as a "residential dwelling."

2. Applicability of Exemption under Entry No. 13 of Notification No. 09/2017-IT (Rate):
The exemption under Entry No. 13 applies to "Services by way of renting of residential dwelling for use as residence." The appellant contended that the property is used by the lessee for running a paying guest accommodation, which involves long-term stays by students, thus qualifying as a residence. However, the appellate authority concluded that the lessee, M/s DTwelve Spaces Pvt Ltd, uses the property for its business of providing paying guest accommodation, not as a residence. The exemption is available only if the residential dwelling is used as a residence by the lessee, which is not the case here. Therefore, the exemption does not apply.

3. Validity of the Ruling Passed Beyond the Prescribed Time Limit:
The appellant argued that the ruling was passed beyond the 90-day limit prescribed under Section 98(6) of the CGST Act, making it unsustainable. The appellate authority noted that the application was filed manually on 6th December 2019, and the ruling should have been pronounced by 5th March 2020. Although the ruling was passed after the stipulated period, it does not render the ruling null and void. An order suffering from procedural irregularity can be set right in appeal proceedings.

4. Provision of Leasing Service by the Appellant:
The appellant contended that the lower authority's ruling was contradictory, as it stated that the appellant is not individually providing the service but as part of a group. The appellate authority clarified that the supply of service is between the group of individuals (lessors) and the lessee company. The appellant, being part of this group, does not have a separate locus standi in his individual capacity. The application for advance ruling was made in the context of the group of individuals leasing the property.

Conclusion:
The appellate authority upheld the Advance Ruling No. KAR/ADRG 17/2020 dated 23-03-2020, dismissing the appeal on all counts. The property does not qualify as a "residential dwelling," the exemption under Entry No. 13 does not apply, the ruling's delay does not invalidate it, and the service is provided by the group of lessors, not the appellant individually.