2024 (2) TMI 650 - AAR - GST

Taxability under GST - rent received from the Govt. SWCBH - pure services or not - agreement with the Scheduled Castes Development Department, Hyderabad District, Government Welfare Departmental Hostels, Government Social Welfare College Boys Hostel (Govt SWCBH) to rent out the property to run Social Welfare College Boys Hostel) - HELD THAT - Under serial no. 3 of Notification No. 12/2017 pure services provided in relation to any function entrusted to a municipality under Article 243W of the Constitution of India is eligible for exemption from GST. Clearly the exemption should be directly related to the functions enumerated under Article 243W of the Constitution of India i.e., those functions listed under 12th schedule. The Schedule 11 to the constitution of India contains Education including primary and secondary schools at serial no. 17. However the Schedule 12 does not contain such specific entry. Therefore the applicant is not eligible for this exemption. The applicant is providing renting of buildings to GHMC and in municipalities and there is no direct relation between the services provided by the applicant and the functions discharged by the GHMC under Article 243W read with schedule 12 to the Constitution of India. Therefore these services do not qualify for exemption under Notification No. 12/2017. Thus, the rent received from the Govt. SWCBH is taxable.

Summary

Issues involved:
The judgment involves determining the taxability of rent received from the Government SWCBH.

Brief facts of the case:
The applicant entered into an agreement with the Scheduled Castes Development Department to rent out property for running a Social Welfare College Boys Hostel. The department provides hostel facilities to students of Scheduled Caste weaker sections and backward classes. The applicant believes they are providing pure services exempt under Notification No. 12/2017.

Questions raised:
The main question raised was whether the rent received from the Government SWCBH is taxable.

Discussion & Findings:
The judgment analyzed the exemption under Notification No. 12/2017, which covers pure services provided to the Government by way of activities related to functions entrusted to a Municipality under the Constitution. The judgment referred to specific functions listed under the Constitution, such as urban planning, public health, and poverty alleviation. It highlighted the requirement for a direct link between the services provided and the functions listed in the Constitution for exemption eligibility. The judgment cited legal precedents to clarify the meaning of "in relation to" and emphasized the need for a direct and immediate link with the functions specified in the Constitution for exemption.

Ruling:
The ruling clarified that the rent received from the Government SWCBH is taxable, as the services provided by the applicant did not have a direct relation to the functions discharged by the Government under the Constitution. Therefore, the services did not qualify for exemption under Notification No. 12/2017.