2019 (10) TMI 1136 - AAR - GST

Tax Liability for Renting Rooms and Stalls for Non-Religious Purposes

The applicant was found liable to pay tax on renting temporary residential rooms and space for shops and stalls as these activities were not considered ... Scope of supply - business - charitable activities - exemption under Notification No. 12/2017 - renting of residential dwelling - accommodation services (Heading 9963) - declared tariff threshold for exemption - intermediary / pure agent - related persons (Explanation to Section 15)Scope of supply - business - charitable activities - Whether renting of temporary residential rooms and renting of space for shops by the applicant are taxable supplies - HELD THAT: - The applicant is a charitable trust but providing accommodation, renting out properties and booking accommodation or supplying food and drinks are not directly part of core religious activities. Such activities fall within the inclusive definition of 'supply' under Section 7(1) and are not excluded by Section 7(2). The definition of 'charitable activities' in Notification No. 12/2017 covers advancement of religion, but commercial accommodation and letting out space are not activities directly related to that advancement and therefore cannot be treated as outside the scope of 'supply' merely because the supplier is a charitable trust. Consequently the renting activities are taxable supplies. [Paras 11, 17]Applicant is liable to pay tax on renting of temporary residential rooms and renting of space for shops and stalls.Declared tariff threshold for exemption - accommodation services (Heading 9963) - renting of residential dwelling - Whether renting of temporary residential rooms where declared tariff is Rs.1,000 or more per day is taxable and the applicability of exemption for declared tariff below Rs.1,000 - HELD THAT: - Accommodation services fall under Heading 9963 and the rate schedule distinguishes declared tariff slabs. Entry 7(ii) makes accommodation with declared tariff of Rs.1,000 to Rs.2,499 per unit per day taxable. Entry providing exemption applies to services by a hotel/inn/guest house with declared tariff below Rs.1,000. The applicant's accommodations are temporary lodging not residential dwellings (which require permanence) and therefore the exemption for renting of residential dwelling does not apply. Thus where the declared tariff per unit is Rs.1,000 or more per day, the accommodation is taxable as per the relevant tariff slab; accommodation below Rs.1,000 is governed by the exemption entry for hotels/inns etc. but the factual classification as hotel/inn/guest house must obtain for that exemption to apply. [Paras 12, 17]Applicant is liable to pay tax on temporary residential rooms if the declared tariff is Rs.1,000 or more per day; accommodations are not covered by the 'renting of residential dwelling' exemption because they are temporary.Exemption under Notification No. 12/2017 - renting of precincts of a religious place - Whether renting of space for shops and stalls in the religious precincts is exempt when charges are below the prescribed monetary ceiling - HELD THAT: - Notification No. 12/2017 exempts renting of precincts of a religious place owned/managed by an entity registered under specified Income Tax Act provisions, subject to monetary ceilings. However, the Authority concluded that the applicant's renting of space for shops and stalls constitutes a supply within Section 7(1) and is not automatically excluded as a charitable activity. Where the activity does not satisfy the specific conditions of the exemption or where the nature of the activity is commercial, the exemption cannot be invoked simply because the owner is a charitable trust. Consequently the applicant is liable to tax on renting of space for stalls (subject to the monetary ceilings and factual classification determining applicability of the specific exemption). [Paras 6, 11, 13, 17]Applicant is liable to pay tax on renting of space for stalls (exemption under Notification No.12/2017 not automatically attracted).Scope of supply - accommodation services (Heading 9963) - Whether supply of food and beverages at subsidized rates to devotees by the applicant is taxable - HELD THAT: - Supply of food or drink in any manner as part of services is taxable under Entry 7 of Notification No.11/2017 (Heading 9963). The applicant charges consideration for food and beverages even at subsidized rates; such activity is a supply under Section 7(1) and not excluded as a charitable activity merely because the supplier is a religious trust. Accordingly supply of food and beverages at subsidized rates is taxable. [Paras 7, 14, 17]Applicant is liable to pay tax on supply of food and beverages at subsidized rates to devotees.Activities to be treated as supply even if made without consideration - related persons (Explanation to Section 15) - Whether providing space without consideration to a registered person who supplies food and beverages (and receives consideration directly from devotees) is a taxable supply - HELD THAT: - Provision of space without consideration may amount to transfer of usage rights. Schedule I lists activities to be treated as supply even if made without consideration, but that entry does not cover provision of space to an unrelated registered person. If the applicant and the supplying registered person are related persons as per the Explanation to Section 15, then providing space without consideration would be treated as a supply and liable to tax. Absent relatedness, and absent another Schedule I entry, the transaction is not automatically a supply. [Paras 15, 17]Providing space without consideration is taxable only if the applicant and the registered person are 'related persons' as per the Explanation to Section 15; otherwise it is not treated as supply for tax purposes under the facts considered.Intermediary / pure agent - Rule 33 (pure agent) - Whether acting as intermediary to book hotel rooms for pilgrims from outside attracts tax - HELD THAT: - The applicant arranges and facilitates supply of hotel accommodation between hotels and pilgrims and therefore falls within the definition of 'intermediary.' Where the applicant acts as a 'pure agent'-making payments on authorization of the recipient, separately indicating such payments, not holding title, not using the services for own interest and procuring such supplies in addition to services supplied on own account-the amounts paid as a pure agent are excluded from value of supply under Rule 33 and are not taxable. If the applicant does not satisfy all conditions for being a pure agent or is merely a procuring agent, the activity will attract tax on the turnover. [Paras 9, 16, 17]Applicant is liable to tax for acting as an intermediary for booking hotel rooms if it does not satisfy all conditions of a 'pure agent'; if it qualifies as a pure agent, the amounts so procured are not included in the value of supply.Final Conclusion: The Authority held that the applicant's accommodation letting, renting of shop/stall space and supply of subsidized food are taxable supplies; accommodation with declared tariff of Rs.1,000 or more per unit per day is taxable under the relevant tariff slab; providing space without consideration is taxable only if the parties are related; and intermediary activity of booking hotels is taxable unless the applicant qualifies as a 'pure agent' under the prescribed conditions. Issues Involved:1. Tax liability on renting temporary residential rooms and space for shops and stalls for religious programs.2. Tax liability on renting temporary residential rooms with charges less than Rs. 1000 per day.3. Tax liability on renting space for stalls.4. Tax liability on supplying food and beverages at subsidized rates to devotees.5. Tax liability on providing space without consideration for registered persons supplying food and beverages.6. Tax liability for acting as an intermediary for booking hotel rooms for pilgrims.Detailed Analysis:Issue 1: Tax Liability on Renting Temporary Residential Rooms and Space for Shops and StallsThe applicant argued that their activities are for the advancement of religion and not business, hence should not attract GST. They relied on the Supreme Court's decision in Commissioner of Sales Tax v. Sai Publication Fund, which stated that incidental activities to a charitable purpose are not business. However, the authority found that providing accommodation, renting properties, and booking accommodations are not directly related to religious activities and are considered 'supplies' under GST law. Thus, the applicant is liable to pay tax on renting temporary residential rooms and space for shops and stalls.Issue 2: Tax Liability on Renting Temporary Residential Rooms with Charges Less Than Rs. 1000 Per DayThe authority examined the entries in Notification No. 11/2017 and Notification No. 12/2017. It was determined that services by hotels, inns, guest houses, clubs, or campsites for residential or lodging purposes with a declared tariff below Rs. 1000 per day are exempt from tax. The applicant's temporary accommodations fall under this category, thus exempting them from tax if the charges are less than Rs. 1000 per day.Issue 3: Tax Liability on Renting Space for StallsThe authority confirmed that renting space for stalls, even if for religious purposes, is taxable under GST law. The applicant is liable to pay tax on renting space for stalls.Issue 4: Tax Liability on Supplying Food and Beverages at Subsidized Rates to DevoteesThe supply of food and beverages, even at subsidized rates, is considered a taxable supply under GST law. The applicant is liable to pay tax on such supplies.Issue 5: Tax Liability on Providing Space Without Consideration for Registered Persons Supplying Food and BeveragesProviding space without consideration does not fall under the scope of supply unless the applicant and the registered person are related persons as defined under GST law. If they are related, the transaction is taxable.Issue 6: Tax Liability for Acting as an Intermediary for Booking Hotel Rooms for PilgrimsThe applicant acts as an intermediary by booking hotel rooms for pilgrims and collecting advance payments. If the applicant meets the conditions of a 'pure agent' as defined under GST law, they are not liable to pay tax. However, if they do not meet these conditions, they are liable to tax for acting as an intermediary.Ruling:1. The applicant is liable to pay tax on renting temporary residential rooms and space for shops and stalls.2. The applicant is liable to pay tax on renting temporary residential rooms if the declared tariff is Rs. 1000 or more per day.3. The applicant is liable to pay tax on renting space for stalls.4. The applicant is liable to pay tax on supplying food and beverages at subsidized rates to devotees.5. The applicant is liable to pay tax on providing space without consideration if the applicant and the registered person are related persons.6. The applicant is liable to tax for acting as an intermediary for booking hotel rooms if they do not satisfy the conditions prescribed for a pure agent.