Property leasing for residence with amenities is composite supply under Karnataka GST. Exemption applies to specific transactions.
The ruling determined that leasing of property for use as residence with basic amenities qualifies as a composite supply under the Karnataka Goods and Services Tax Act. Renting of property by the Applicant does not fall under the exemption provided in Notification 12/2017. However, the exemption under entry 14 of the same notification applies to the Applicant's transaction. Lastly, leasing property for residential subletting does not qualify for the exemption for residential dwelling under the said notification.
Issues Involved:1. Whether leasing of property for use as residence along with basic amenities qualifies as composite supply under Section 2(30) of the Karnataka Goods and Services Tax Act, 2017.
2. Whether renting of property by the Applicant is covered under entry 12 of the exemption Notification 12/2017 (Rate) dated June 28, 2017.
3. Whether services by the Applicant are covered under entry 14 of the exemption Notification 12/2017 (Rate) dated June 28, 2017.
4. Whether leasing of property for residential subletting is covered under the exemption for residential dwelling via notification 12/2017 (Rate) dated June 28, 2017.
Issue-wise Detailed Analysis:Issue 1: Composite Supply Qualification7.3 The first question is whether leasing of property for use as residence along with basic amenities would qualify as composite supply under Section 2(30) of the Karnataka Goods and Services Tax Act, 2017 or not.
7.4 The applicant provides renting of immovable property service of residential dwelling along with basic amenities such as maintenance, security, and housekeeping for use as residence. The services are generally provided as a comprehensive bundle and are not available as separate components. The charges are fixed for each month, and the tenant does not have the option to select individual supplies from the bundle.
7.5 The applicant takes a residential dwelling, having 3 or 4 BHK accommodation on lease/rent and gives each bedroom to an individual on lease/rent with a common kitchen for all occupants. Thus, the applicant is not leasing/renting a residential dwelling on the whole but individual bedrooms, which amounts to provision of accommodation as "Rooming House."
7.6 A Rooming house is a residential house where most or some rooms are rented out to paying customers. The Explanatory Notes to the Scheme of Classification of Services stipulate that accommodation services provided by rooming houses are covered under SAC 996311. Hence, the services of the applicant get covered under SAC 996311 as accommodation services and are not covered under renting of residential dwelling.
7.7 The housekeeping service, if provided, becomes part of the accommodation service. The maintenance and security services provided along with the accommodation services are naturally bundled services, fulfilling the conditions for a composite supply under Section 2(30) and Section 2(90) of the CGST Act 2017.
7.10 The supplies are made in conjunction with each other in the ordinary course of business, fulfilling the third condition for composite supply. Thus, the impugned services of the applicant qualify as a composite supply.
Issue 2: Exemption under Entry 12 of Notification 12/20177.11 The second question is whether renting of property by the Applicant is covered under entry 12 of the exemption Notification 12/2017 (Rate) dated June 28, 2017. The applicant contends that they are engaged in renting of residential dwelling, not meant for temporary stay, and hence claim the exemption under Sl.No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017.
7.12 The services provided by the applicant are covered under accommodation services under SAC 996311, as held in the previous paras. Therefore, the exemption under Sl.No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, is not applicable to the impugned transaction.
Issue 3: Exemption under Entry 14 of Notification 12/20177.12 The third question is whether the activity of leasing of residential units for further residential leasing would qualify for exemption under entry 14 of the Exemption Notification. Notification 12/2017-Central Tax (Rate) dated 28.06.2017, vide Sl.No.14 exempts services provided by a hotel, inn, guest house, club, or campsite for residential or lodging purposes, having a value of supply of a unit of accommodation below or equal to one thousand rupees per day or equivalent. The services provided by the applicant are covered under SAC 996311 as accommodation services. The exemption is applicable to the transaction of the applicant subject to the condition that the value of supply is less than or equal to one thousand rupees per day or equivalent.
Issue 4: Exemption for Residential Subletting under Entry 12 of Notification 12/20177.13 The last question is whether the activity of leasing of residential units for further residential leasing would qualify for exemption under entry 12 of the Exemption Notification. The applicant contends that the entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 gives an absolute exemption to the activity of leasing for use as residence, irrespective of the legal status of the supplier or recipient of supply.
7.14 GST is a transaction-based tax, with seamless input tax credit at each transaction level. In the transaction between the applicant and the business entity, the renting of residential dwelling is not for use as residence by the business entity but in the course or furtherance of the business of the said entity. Hence, the exemption under entry No.12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the impugned transaction.
8. In view of the foregoing, we rule as follows:
RULING1. Leasing of property for use as residence along with basic amenities, in this case, is covered under accommodation services, falls under SAC 996311, and qualifies as composite supply under Section 2(30) of the CGST/KGST Act, 2017.
2. Renting of property by the Applicant is not covered under entry 12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as their services are covered under accommodation services falling under SAC 996311.
3. The exemption under entry 14 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 is available to the transaction of the applicant.
4. Leasing of property for residential subletting would not be covered under the exemption for residential dwelling under entry 12 Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as the two are different and individual transactions.
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