2018 (9) TMI 1340 - AAAR - GST

GST Applicable on Hospital Rent Despite Healthcare Exemption, Input Tax Credit Denied

The Authorities upheld that GST is applicable on rent paid for hospital premises, even though healthcare services are exempt. They ruled that input tax ... Levy of GST on renting of immovable property - Exemption of healthcare services from GST - Input Tax Credit on exempt supplies - Refund of accumulated input tax credit under Rule 89 - Scope of the Appellate Authority for Advance Ruling under section 101 - Advance Ruling procedure under section 98/97Levy of GST on renting of immovable property - Exemption of healthcare services from GST - GST is leviable on the rent paid/payable for premises taken on lease by the hospital for running its services. - HELD THAT: - The Appellate Authority examined the nature of the appellant's outward supplies and the notifications specifying the taxability of renting of immovable property. The healthcare services provided by the appellant are exempt under the relevant exemption notification. Independently, renting/letting of immovable property for use (including premises taken on lease to run the hospital) falls within the taxable entry for Real Estate Services in the rate notifications, attracting GST at the prescribed rate. Consequently, the AAR's conclusion that GST is leviable on the rent paid/payable for the leased premises was legally sustainable and is upheld. [Paras 7, 9, 10, 11]AAR ruling that GST is leviable on rent of the leased premises is upheld.Input Tax Credit on exempt supplies - Refund of accumulated input tax credit under Rule 89 - Scope of the Appellate Authority for Advance Ruling under section 101 - Advance Ruling procedure under section 98/97 - The appellant's plea seeking a ruling on availability/refund of input tax credit and applicability of Rule 89 was not entertained as the matter was not raised before the AAR and lies outside the scope of the appeal. - HELD THAT: - The Appellate Authority noted that no question regarding ITC on inputs used for exempt supplies or refund under Rule 89 was placed before the AAR and that the Appellate Authority's jurisdiction under the statute is limited to confirming or modifying the ruling appealed against. Issues raised for the first time in the appeal which were not the subject-matter of the AAR's ruling cannot be adjudicated in the appeal. Therefore the appellant's submissions on non-availability of ITC set-off, claim for refund of accumulated ITC and a specific ruling on Rule 89 are outside the realm of the present appeal and are not maintainable before this forum. [Paras 12]Plea on ITC/refund and applicability of Rule 89 dismissed as not sustainable for want of prior consideration by the AAR.Final Conclusion: The impugned Advance Ruling that GST is leviable on the rent paid/payable for premises taken on lease to run the hospital is affirmed; the additional plea on input tax credit/refund (Rule 89) raised for the first time in appeal is dismissed. The appeal is dismissed and the AAR order is upheld. Issues involved:- Whether GST is leviable on the rent payable by a hospital providing lifesaving services.- Whether input tax credit of GST paid on rent can be availed if the output supply is not taxable.- Whether there is a provision for refund of input tax credit on rent paid for the premises.- Whether the Appellate Authority for Advance Ruling can pass a ruling on the applicability of Rule 89(h) of the KGST Act.Analysis:Issue 1: GST on rent for hospital servicesThe Appellant, a Cardiology Specialized Hospital, appealed against the ruling that GST is leviable on the rent paid for the premises taken on lease. The Appellant argued that since their healthcare services are exempted from GST, the rent should also be exempt. However, the Authorities upheld the ruling citing specific Notifications levying GST on such rent.Issue 2: Input tax credit on non-taxable output supplyThe Appellant contended that as their output supply is not taxable, they cannot avail input tax credit on the GST paid for rent. They sought a refund of the input tax credit. The Authorities clarified that there is no provision for refund in such cases, as the purpose of paying GST on rent does not serve any specific purpose due to the exempted nature of the output supply.Issue 3: Provision for refund of input tax creditThe Appellant raised concerns about the lack of provision for refund of input tax credit on rent paid for the premises. They requested the Authorities to pass a ruling on the applicability of Rule 89(h) of the KGST Act to pursue the refund. However, the Authorities dismissed this plea, stating that the issue was not raised before the Advance Ruling Authority and hence cannot be considered in the appeal.Conclusion:The Authorities upheld the original ruling that GST is leviable on the rent paid for the hospital premises, despite the healthcare services being exempted from GST. They dismissed the appeal by the Appellant, stating that there is no provision for refund of input tax credit on rent paid for non-taxable output supplies. The plea for a ruling on the applicability of Rule 89(h) of the KGST Act was also rejected as it was not raised before the initial Authority for Advance Ruling.