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2020 (10) TMI 767 - AAR - GSTClassification of services - Levy of GST - leasing of pathway to a person to her/his dwelling unit by CMRL - exemption granted under Notification 12/2017-CT(R) - HELD THAT - In this case, the pathway is owned by the applicant and both the applicant and the individual have the right to use pathway. In the case of renting or leasing of the property, the owner(applicant in this case) will not have the right to use the the land/pathway involved as leasing involves transfer of the right to enjoy the property to the lessee and the lessor does not retain right to enjoy the property during the lease period. In the instant case, it is not a lease of the pathway but only Easement rights are granted to the individual by the applicant. Therefore the classification of the service supplied is not covered under SAC 9972 which covers renting or leasing of property. In the case at hand, the applicant owns the pathway but has agreed through an MOU with the individual to permit her to use the pathway to access the main road from her residential property which is adjacent to the pathway. This is an easement right given by the applicant to the individual to enjoy her residential property for a period of time for a consideration. The applicant has agreed through a MOU to tolerate her use of this pathway for a period of time for consideration. Hence, this service of agreeing to grant easement rights is a service of agreeing to tolerate an act and is classifiable under SAC 999794 under other miscellaneous services / Agreeing to tolerate an act . Thus, the act of agreeing to grant easement rights of the pathway by the applicant to Dr.K.Prema by way of shared access is classifiable under SAC 999794 and taxable under @18%.
Issues Involved:
1. Whether leasing of pathway to a person to her/his dwelling unit by CMRL is taxable under GST. 2. Classification of the service under GST. 3. Applicability of exemption under Notification No. 12/2017-C.T.(Rate). Detailed Analysis: Issue 1: Taxability of Leasing Pathway Under GST The applicant, CMRL, sought an advance ruling on whether leasing a pathway to a person for access to their dwelling unit is taxable under GST. The applicant argued that the pathway should be considered part of the residential dwelling, making it eligible for GST exemption under Notification No. 12/2017-C.T.(Rate). They contended that the easement right over the pathway is essential for the beneficial enjoyment of the residential property, thus integrating it into the "dwelling unit." Issue 2: Classification of the Service The ruling examined the nature of the service provided by CMRL. The pathway was leased for shared access to the lessee’s residential property. The ruling referred to Section 4 of the Indian Easements Act, 1882, which defines "easement" as a right for the beneficial enjoyment of land not owned by the lessee. The service was classified under SAC 999794, which covers "agreeing to tolerate an act," as CMRL permitted the use of the pathway for a consideration. Issue 3: Applicability of Exemption The applicant claimed exemption under Sl.No. 12 of Notification No. 12/2017-C.T.(Rate), which exempts services by way of renting residential dwellings for use as residence. The ruling, however, concluded that the pathway does not qualify as a residential dwelling. The pathway is not an accommodation service (SAC 9963) nor does it involve renting or leasing of property (SAC 9972). Instead, it is an easement right granted for a specific period, classifiable under SAC 999794. Ruling: The act of granting easement rights for the pathway by CMRL to the lessee is taxable under GST. The service is classified under SAC 999794 and is subject to 9% CGST and 9% SGST. The exemption under Notification No. 12/2017-C.T.(Rate) does not apply as the pathway is not a residential dwelling unit. Conclusion: The leasing of the pathway by CMRL to the lessee is a taxable supply under GST, classified under SAC 999794, and is not eligible for exemption as a residential dwelling unit. The service is subject to 9% CGST and 9% SGST.
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