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2021 (4) TMI 86 - AAR - GSTClassification of supply - Composite supply or not - leasing of property for use as residence along with basic amenities - renting of property - leasing of property for residential subletting - Exemption Notification 12/2017 (Rate) dated June 28, 2017 - HELD THAT - A Rooming house is a residential house, of which most or some of the rooms are rented out to paying customers. It is a place where individuals who are living in rent in that house shares the bathroom and the kitchen. The Explanatory Notes to the Scheme of Classification of Services stipulates, at the exclusion clause to the SAC 997211, that accommodation services provided by rooming houses are covered under SAC 99631. Further SAC 996311 covers Room or unit accommodation services and includes accommodation services consisting of rooms or units, with or without kitchens with or without daily housekeeping services, provided by Hotels, INN, Guest houses, Clubs other similar establishments on a single or multi occupancy basis, for purposes of leisure or business or others - the services of the applicant squarely get covered under SAC 996311 as accommodation services and hence the said services are not covered under renting of residential dwelling. It is pertinent to mention here that the Goods and Services Tax (GST) is a transaction based tax, with seamless input tax credit at each transaction level. In the instant case two transactions are involved. The first being a transaction between the applicant the business entity and the second between the business entity the actual tenant. Thus the two transactions are different and the taxability / exemption of these transactions need to be examined individually. In the transaction between the applicant business entity, the renting of residential welling is not for use as residence by the business entity but in the course or furtherance of the business of the said entity and hence the exemption under entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the impugned transaction. On the other hand in the transaction between the business entity and the tenant, the service amount to renting/leasing of rooming house which falls under accommodation services that get covered under SAC 996311 and hence the exemption under entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 would not be applicable to the said transaction. Leasing of property for use as residence along with basic amenities, in the instant case, is covered under accommodation services, as ruled in the preceding paras, falls under SAC 996311 and hence would qualify as composite supply under Section 2(30) of the CGST/KGST Act, 2017 - Renting of property by Applicant is not covered under entry 12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as their services are covered under accommodation services falling under SAC 996311 - the exemption under entry 14 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is available to the transaction of the applicant - Leasing of property for residential subletting would not be covered under the exemption for residential dwelling under entry 12 Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as the two are different and individual transactions.
Issues Involved:
1. Whether leasing of property for use as residence along with basic amenities qualifies as composite supply under Section 2(30) of the Karnataka Goods and Services Tax Act, 2017. 2. Whether renting of property by the Applicant is covered under entry 12 of the exemption Notification 12/2017 (Rate) dated June 28, 2017. 3. Whether services by the Applicant are covered under entry 14 of the exemption Notification 12/2017 (Rate) dated June 28, 2017. 4. Whether leasing of property for residential subletting is covered under the exemption for residential dwelling via notification 12/2017 (Rate) dated June 28, 2017. Issue-wise Detailed Analysis: Issue 1: Composite Supply Qualification 7.3 The first question is whether leasing of property for use as residence along with basic amenities would qualify as composite supply under Section 2(30) of the Karnataka Goods and Services Tax Act, 2017 or not. 7.4 The applicant provides renting of immovable property service of residential dwelling along with basic amenities such as maintenance, security, and housekeeping for use as residence. The services are generally provided as a comprehensive bundle and are not available as separate components. The charges are fixed for each month, and the tenant does not have the option to select individual supplies from the bundle. 7.5 The applicant takes a residential dwelling, having 3 or 4 BHK accommodation on lease/rent and gives each bedroom to an individual on lease/rent with a common kitchen for all occupants. Thus, the applicant is not leasing/renting a residential dwelling on the whole but individual bedrooms, which amounts to provision of accommodation as "Rooming House." 7.6 A Rooming house is a residential house where most or some rooms are rented out to paying customers. The Explanatory Notes to the Scheme of Classification of Services stipulate that accommodation services provided by rooming houses are covered under SAC 996311. Hence, the services of the applicant get covered under SAC 996311 as accommodation services and are not covered under renting of residential dwelling. 7.7 The housekeeping service, if provided, becomes part of the accommodation service. The maintenance and security services provided along with the accommodation services are naturally bundled services, fulfilling the conditions for a composite supply under Section 2(30) and Section 2(90) of the CGST Act 2017. 7.10 The supplies are made in conjunction with each other in the ordinary course of business, fulfilling the third condition for composite supply. Thus, the impugned services of the applicant qualify as a composite supply. Issue 2: Exemption under Entry 12 of Notification 12/20177.11 The second question is whether renting of property by the Applicant is covered under entry 12 of the exemption Notification 12/2017 (Rate) dated June 28, 2017. The applicant contends that they are engaged in renting of residential dwelling, not meant for temporary stay, and hence claim the exemption under Sl.No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017. 7.12 The services provided by the applicant are covered under accommodation services under SAC 996311, as held in the previous paras. Therefore, the exemption under Sl.No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, is not applicable to the impugned transaction. Issue 3: Exemption under Entry 14 of Notification 12/20177.12 The third question is whether the activity of leasing of residential units for further residential leasing would qualify for exemption under entry 14 of the Exemption Notification. Notification 12/2017-Central Tax (Rate) dated 28.06.2017, vide Sl.No.14 exempts services provided by a hotel, inn, guest house, club, or campsite for residential or lodging purposes, having a value of supply of a unit of accommodation below or equal to one thousand rupees per day or equivalent. The services provided by the applicant are covered under SAC 996311 as accommodation services. The exemption is applicable to the transaction of the applicant subject to the condition that the value of supply is less than or equal to one thousand rupees per day or equivalent. Issue 4: Exemption for Residential Subletting under Entry 12 of Notification 12/20177.13 The last question is whether the activity of leasing of residential units for further residential leasing would qualify for exemption under entry 12 of the Exemption Notification. The applicant contends that the entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 gives an absolute exemption to the activity of leasing for use as residence, irrespective of the legal status of the supplier or recipient of supply. 7.14 GST is a transaction-based tax, with seamless input tax credit at each transaction level. In the transaction between the applicant and the business entity, the renting of residential dwelling is not for use as residence by the business entity but in the course or furtherance of the business of the said entity. Hence, the exemption under entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the impugned transaction. 8. In view of the foregoing, we rule as follows: RULING1. Leasing of property for use as residence along with basic amenities, in this case, is covered under accommodation services, falls under SAC 996311, and qualifies as composite supply under Section 2(30) of the CGST/KGST Act, 2017. 2. Renting of property by the Applicant is not covered under entry 12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as their services are covered under accommodation services falling under SAC 996311. 3. The exemption under entry 14 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is available to the transaction of the applicant. 4. Leasing of property for residential subletting would not be covered under the exemption for residential dwelling under entry 12 Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as the two are different and individual transactions.
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