GST treatment of shared pathway access: easement rights for consideration are taxable service, not exempt residential dwelling rental.

Grant of a limited shared access right over a pathway for consideration is treated as an easement and, under GST, as a supply of service because easements are covered by the statutory concept of supply and Schedule II treats easement of land as a service. The transaction was therefore taxable. It was also not exempt as renting of a residential dwelling for use as residence, because the arrangement was not a lease of residential accommodation. The service was classified as an agreement to tolerate an act under SAC 999794 and brought within the corresponding taxable entry, so the residential dwelling exemption was unavailable.

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Issues: (i) Whether the grant of shared access over the pathway amounted to a taxable supply under GST. (ii) Whether the transaction was exempt as renting of a residential dwelling for use as residence, or otherwise classifiable under GST.

Issue (i): Whether the grant of shared access over the pathway amounted to a taxable supply under GST.

Analysis: The arrangement granted the occupant a right to use the pathway for a fixed period for consideration. Such a right answered the description of an easement within the meaning of the Indian Easements Act, 1882. Under Section 7 of the Central Goods and Services Tax Act, 2017, supply includes lease, licence, rental and other forms of supply made for consideration in the course or furtherance of business. By virtue of Schedule II, easement of land is treated as a supply of service. The consideration paid under the settlement established the taxable character of the transaction.

Conclusion: The grant of easement rights was held to be a supply of service under GST and was taxable.

Issue (ii): Whether the transaction was exempt as renting of a residential dwelling for use as residence, or otherwise classifiable under GST.

Analysis: The pathway arrangement was not a lease of a residential dwelling and did not fall within the exemption for renting of residential dwelling under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The service was not accommodation service and was not classifiable under SAC 9963 or SAC 9972. Since the owner retained use of the pathway and only permission for shared access was granted, the service was treated as an agreement to tolerate an act, falling under SAC 999794 and the corresponding taxable entry under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

Conclusion: The exemption was denied and the service was classified under SAC 999794 as taxable.

Final Conclusion: The transaction was held taxable as a service of granting easement rights, and the residential dwelling exemption was not available.

Ratio Decidendi: Grant of a limited right of shared access over land for consideration constitutes a taxable supply of service, and such easement rights are not covered by the exemption for residential dwelling.

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