2019 (10) TMI 1136 - AAR - GST

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

In Re: M/s. Acharya Shree Mahashraman Chaturmas Pravas Vyavastha Samiti Trust

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 ... Levy of GST - renting of temporary residential rooms for consideration to the devotees and renting of space for shops and stalls for the purpose of religious programmers where the predominant object is not to do business but for advancement of religion - Scope of 'Charitable Activities' - HELD THAT:- The applicant is constructing buildings and giving it on rent, etc. which are not directly related to the advancement of religion, spirituality or yoga and hence the contention of the applicant that these are not in the course or furtherance of business cannot be accepted and held that these are covered within the meaning of “supplies” under section 7(1) of the CGST Act. What is not covered under the term business is the core activities propagating religious or spiritual activity and not the commercial activity of receipt and supply of goods or services or both, undertaken by a charitable trust - Though the main object of the trust is charitable activity which cannot be covered under the term “business”, not all activities of the trust can be kept out of the definition of “supplies”. Thus, if the person (supplier) makes a taxable supply, he shall be liable to get himself registered, if his aggregate turnover exceeds the threshold - The applicant is liable to pay tax in renting of temporary residential rooms for consideration to the devotees and renting of space for shops and stalls. Whether the applicant is liable to pay tax on renting of temporary residential rooms as mentioned in five categories to the devotees to stay for the purpose of religious programmes where charges per room is less than ₹ 1000-00 per day? - N/N. 11/2017 - Central Tax (Rate) dated 28.06.2017 - HELD THAT:- The plain reading of the entry 7(ii) of the above Notification reveals that the accommodation provided in commercial places meant for residential or lodging purposes having a declared tariff of a unit of accommodation of ₹ 1000-00 per day per unit or equivalent would be taxable at 6% under CGST Act. The main clauses to be considered is that the accommodation must be provided in a commercial place and such commercial place must be meant for residential or lodging purposes. There is no doubt that the applicant is a supplier of service within the scope of section 7(1) of the CGST Act and they are providing accommodation services to the pilgrims and charging the persons on a monthly basis or daily basis for residential purposes and hence the activity of the applicant is squarely covered under this entry. Entry No. 14 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 states that “Services by a hotel, inn, guest house, club or campsite by whatever name called, for residential or lodging purposes, having a declared tariff of a unit of accommodation below one thousand rupees or equivalent” is exempted from tax” and these services must be of heading 9963. The applicant is liable to pay tax on renting of temporary residential rooms of all categories if the declared tariff of a unit of accommodation is ₹ 1000-00 or more per day or equivalent. Whether the applicant is liable to pay tax on the renting of space for stalls? - HELD THAT:- The applicant is liable to pay tax on renting of space for stalls - Answered in affirmative. Whether the applicant is liable to pay tax on supply of food and beverages at subsidized rates to the devotees, where the predominant object is not to do business but for the advancement of religion? - HELD THAT:- It is to be noted that the applicant is charging consideration for the supply of services. The entry 7 of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 makes it very clear that the supply of goods being food or any article for human consumption or drink by way of or part of any service or in any manner whatsoever is taxable. Hence the supply of food and beverages at subsidized rates to the devotees is taxable under the GST Act. Whether the applicant is liable to pay tax on providing space for registered person without consideration for supply of food and beverages to the devotees, where consideration is received by registered person directly from devotees? - HELD THAT:- The applicant is providing space for registered person without consideration for supply of food and beverages to the devotees and the consideration for the food and beverages supplied by such registered person is received by him directly from the devotees. This would amount to a supply of usage rights of space without consideration and the devotees are consumers - Schedule I to the CGST Act which is related to the “activities to be treated as supply even if made without consideration” does not cover this item as long as the registered person and the applicant arc not related persons. In case the two are related persons as per definition of “related persons” as defined in Explanation to section 15 of the CGST Act, 2017, then the providing of space for registered person without consideration would be a supply liable to tax as per the provisions of the CGST Act, 2017. Whether applicant is liable to pay tax for acting intermediary for booking hotel rooms to the pilgrims from outside? - HELD THAT:- It is observed that the applicant intends to book hotel rooms to the pilgrims from outside and the supply of service is by the hotel to the pilgrims and the applicant is facilitating the supply of accommodation service to the pilgrims by the hotel - The applicant is liable to tax for acting as an intermediary for booking of hotel rooms to the pilgrims from outside, if he does not satisfy all the conditions prescribed for a pure agent (i.e the services must be procured from suppliers of accommodation service in addition to the service he supplies on his own account). 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.