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TMI Blog2021 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ess 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 accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. If the answer to 2 is negative, 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 would be covered under the exemption for residential dwelling via notification 12/2017 (Rate) dated June 28, 2017. 3. Admissibility of the application : The applicant, filed the instant application, in relation to classification of their services, applicability of a notification and determination of liability to pay tax on their services. Further the applicant has sought advance ruling in respect of the questions on the issues covered under Section 97(2)(a), (b) (e) of the CGST Act 2017 and hence the application is admitted. 4. STATEMENT OF FACTS 4.1 The Applicant submitted that they are engaged in provision of services by way of leasing of residential units for use as residence to Tenants and furnished the following facts in relation to the questions on which advance rulings have been sought. a) The Applicant provides residential dwelling along with basic amenities such as maintenance, security and housekeeping. The services are gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posite supply and supply of goods is a principal supply; Principle supply (90). principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; Mixed supply (74). mixed supply means two or more individual supplies of goods or services, or any combination thereof made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration .- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; 5.3 Based on the above, it can be observed that, in order for a bundle to qualify as a Composite supply, the following cumulative conditions are required to be fulfilled: i. The supply consists of two or more taxable supplies; ii. The supplies are naturally bundled; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays a single amount, no matter how much of the package they actually receive or use; The elements are normally advertised as a package; The different elements are not available separately; The different elements are integral to one overall supply - if one of more are removed, the nature of the supply would be affected. 5.9 In order to establish that the supply of renting of residential dwelling is naturally bundled in the ordinary course of business, each of the above indicators have been analyzed in light of the facts of the instant case: Sl.No. Indicator Applicability 1. Perception of the customer Whether the customer (Tenant) views the bundles as a naturally bundled supply (the components of which are often supplied in conjunction with each other) is an important factor in determining whether the supply qualifies as a composite supply. Supply of service by way of residential accommodation is ordinarily provided along with basic amenities such as security and maintenance. Availability of the same is a criteria for a substantial number of tenants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and provided as a package with security, maintenance and basic housekeeping. 6. Different elements are not available separately A tenant cannot opt for stand-alone renting or stand-alone amenities. The elements form part of a comprehensive package being renting of residential dwelling and are not provided or advertised separately. 7. Different elements are integral to one overall supply if one of more are removed, the nature of the supply would be affected Security, maintenance and housekeeping severely impact the quality of residential dwelling experience to the clients. Dependability on the amenities is one of the crucial factors evaluated by the tenant while determining the quality of service by way of renting of residential dwelling. 5.10 Based on the above, the Applicant submits that each of the indicative parameters results in the conclusion that the bundle of supply by way of renting of residential dwelling along with security, maintenance and housekeeping is a naturally bundled supply made in conjunction with each other in the ordinary course of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient behind approaching the applicants is to avail accommodation services. 5.13.3 The said ratio can be applied in the instant case to conclude that the services provided by Applicant by way of renting of residential units along with basic amenities of housekeeping, maintenance and security would be considered as a composite supply of services as the essential nature of the bundle is supply of residential accommodation. 5.13.4 The above rulings is squarely applicable in the instant case as the facts are largely overlapping and the principle highlighted in the ruling was that the amenities are allied to the primary supply of renting as the question of independent supply of the amenities without renting does not arise. In light of the same, the Applicant submits that the supplies of renting of residential dwelling along with basic amenities such as security, maintenance and housekeeping should qualify as composite supply with the primary supply as renting of residential accommodation. 5.14 Further, as per Section 8 of the CGST Act, a composite supply shall be regarded as a supply of the principal supply. Hence, the entire bundle of services provided by the Applicant shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property . 4.13.1 What is a residential dwelling ? The phrase residential dwelling has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation , but does not include hotel, motel, inn, quest house, camp-site, lodge, house boat, or like places... y 5.19 On a conjoint reading of the above, it can be inferred that renting of residential dwelling shall entail allowing or granting usage access to an immovable property which includes all residential dwellings but does not include hotel, motel, inn, guest house, lodges or similar places. 5.20 In the instant case, there is no doubt that the Applicant is engaged in renting of residential dwelling. The Applicant submits the following facts evidencing that the Applicant is engaged in provision of residential dwelling (not meant for temporary stay): - The intention behind the supply of services by the Applicant is to offer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of supply of a unit of accommodation below or equal to one thousand rupees per day or equivalent. Nil Nil 5.25 The above entry seeks to cover residential accommodation or lodging provided by a hotel, guest house, club or campsite (by whatever name called) for residential purposes. To the extent of renting of a unit residential accommodation, it appears that both the entries are competing in light of the fact that entry 14 covers service providers (by whatever name called) providing residential lodging. 5.26 Hence, in a scenario where answer to issue 2 is negative, then the Applicant should be entitled to exemption for provision of residential lodging where the consideration works out to less than INR 1000 per day. Issue: 4 Whether the activity of leasing of residential units for further residential leasing would qualify for exemption under entry 12 of the Exemption Notification 5.27 On bare perusal of the Applicability of entry no. 12 of the Exemption Notification it appears that exemption is provided to leasing of residential dwelling for use as residence. It is pertinent to note that the entry appears to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the dwelling unit is used as residence. It appears from the documents produced that all the above dwelling units are being used for residence, irrespective of whether they are let out to individuals or a commercial entity. The Applicant s service of renting/ leasing out the dwelling units for residential purpose is, therefore, exempt under Sl. No.12 of the Exemption Notification. 5.31 Application of the above Ruling to the Applicant s case 5.31.1 The Applicant understands that an Advance Ruling passed for an assessee is binding only on that assessee in the peculiar facts and circumstances of their case. Hence, it does not have a binding force on other assessee. 5.31.2 However, the same has been relied upon by the Applicant only to reiterate the fact that exemption under entry 12 of the Exemption Notification is dependent on whether the premises is used as residence and not on whether the recipient entity is an individual or commercial entity. 5.31.3 In light of the above submissions, and also in light of the facts presented vide Point 4.2 (supra), it is evident that all units of the Applicant are used as residence. Further, even if the unit is let out to a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/rent and gives the each bed room to an individual on lease / rent with a common kitchen for all the occupants. A residential dwelling is a unit with one or more habitable rooms constituting self-contained living quarters for use of 1 or more individuals including the provision of kitchen and sanitary facilities and sleeping accommodation for the exclusive use of such individual or individuals, and having a private entrance from outside the building or from a common hallway or stairway inside the building. Thus the applicant is not leasing/renting a residential dwelling on the whole but is leasing/renting the individual bed rooms to the occupants and hence the applicant s service does not qualify to be a Renting of Immovable Property service as the property leased or rented is not a residential dwelling, but amounts to provision of accommodation as Rooming House . 7.6 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her by the provider of accommodation services. Thus the impugned services are naturally bundled services. 7.10 The third condition is that the supplies are made in conjunction with each other in the ordinary course of business, which implies that it must be a normal practice followed by the service providers in this business. In the instant case the applicant contends that they provide their service along with maintenance security services. Normally the providers of accommodation services do provide the maintenance and security services along with the accommodation services as the entire dwelling would be under their control, but not under the control of roomer. Thus in the ordinary course of business the maintenance security services are supplied in conjunction with each other. Thus the third condition is also fulfilled. Thus we conclude that the impugned services of the applicant do qualify to be a composite supply. 7.11 The second question is whether renting of property by Applicant is covered under entry 12 of the exemption Notification 12/2017 (Rate) dated June 28, 2017. The applicant, in this regard, contended that residential dwelling has not been defined in the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther let out the same for use as residence and contends that the entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017appears to give an absolute exemption to the activity of leasing for use as residence, irrespective of the legal status of the supplier or recipient of supply; the condition of used as residence is satisfied even in this case also hence the activity of leasing out residential units to commercial concerns for the purpose of residential leasing should be eligible for exemption under entry 12 of the Exemption Notification; the intention behind the said exemption is to provide relief from GST on residential dwelling. Accordingly, in order for the said objective to be fulfilled both legs of the transaction (i.e., renting of property by the Applicant to a business entity and further renting of the property by the entity to the Tenants for use as residence) should be covered under the exemption. They relied on the ruling passed by the Advance Ruling Authority of West Bengal in the case of M/s. Borbheta Estate Pvt Ltd. 7.14 It is pertinent to mention here that the Goods and Services Tax (GST) is a transaction based tax, with seamless input tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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