GST exemption applies to residential sub-lease but not property management services with amenities

The AAR Haryana ruled on GST exemption for residential dwelling units leased and sub-leased with amenities. The authority held that the first lease agreement between owner and applicant constitutes property management services under code 997221, while the second sub-lease agreement between applicant and actual residential user qualifies for exemption under Entry 12 of N/N. 12/2017-Central Tax (Rate) as rental services for residential property under code 997211. Additional services like furniture, cleaning, and security were deemed taxable and excluded from the exemption.

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Issues:
1. Interpretation of Entry No. 12 of Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 regarding GST exemption for renting residential dwelling units.

Analysis:
1. Factual Background:
- The Applicant leases residential dwelling units and sub-leases them to individuals/corporates with various amenities.
- Amenities provided include housekeeping, furniture, appliance, security, pest control, etc.

2. Question for Advance Ruling:
- Whether leasing residential units along with amenities qualifies as an exempt supply under Entry No. 12 of the Notification.

3. Applicant's Interpretation:
- Applicant believes leasing residential units for residence is exempt under SAC Code 9972, while maintenance services are taxable at 18% under SAC Code 9987.

4. Record of Personal Hearing:
- Hearing attended by Applicant's representatives who submitted lease agreements.
- Question referred pertains to the applicability of Entry 12 of the Notification on lease agreements.

5. Discussion and Finding:
- Applicant leases from property owners and sub-leases to individuals/corporates with amenities.
- Three segments identified: lease with property owners, sub-lease to occupants, and maintenance services.
- Applicant pays GST only on services agreement, claiming exemption for property lease under Entry 12.
- First lease agreement termed as property management services, not covered under Entry 12.
- Second lease agreement with actual users qualifies under service code 997211 and falls under Entry 12.

6. Advance Ruling:
- First lease agreement categorized as property management services and not exempt under Entry 12.
- Second lease agreement with actual users qualifies under service code 997211 and falls under Entry 12.
- Ruling ordered accordingly.

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