Maharashtra Social Welfare Department rental for backward class girls' accommodation exempt from GST under Notification 12/2017

AAAR Maharashtra held that renting immovable properties to Maharashtra Social Welfare Department for residential accommodation of backward class/Scheduled Tribes girls is exempt from GST. The authority determined such services fall under functions entrusted to panchayats/municipalities under Articles 243G and 243W of the Constitution, qualifying for exemption under Notification No. 12/2017-C.T. (Rate) entry 3. Since the transaction is GST-exempt, TDS provisions under Section 51 of CGST Act 2017 are not applicable. The appellant's aggregate turnover consideration became irrelevant given the exemption determination.

---

---

Issues Involved:
1. Exemption from GST for services provided to the Social Welfare Department.
2. Applicability of TDS provisions under Section 51 of the CGST Act, 2017.
3. Requirement for GST registration based on the aggregate turnover of co-owners.
4. Entitlement to refund of TDS deducted.

Issue-wise Detailed Analysis:

1. Exemption from GST for services provided to the Social Welfare Department:

The Appellant provided services of renting out immovable property to the Social Welfare Department, Government of Maharashtra, for residential accommodation of underprivileged girls. The Appellant argued that these services should be exempt from GST under Notification No. 12/2017-C.T. (Rate), which exempts pure services provided to the government in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution.

The Appellate Authority examined Articles 243G and 243W, along with the Eleventh and Twelfth Schedules of the Indian Constitution, which include functions related to social welfare and the development of weaker sections, including Scheduled Tribes. It was concluded that the services provided by the Appellant fall under these functions, thus qualifying for exemption from GST.

2. Applicability of TDS provisions under Section 51 of the CGST Act, 2017:

The Appellant contended that TDS provisions should not apply as the services provided are exempt from GST. The MAAR had previously ruled that TDS provisions would apply. However, the Appellate Authority found that since the services are exempt from GST, the TDS provisions under Section 51 of the CGST Act, 2017, would not be applicable. The decision was supported by the fact that the Appellant is unregistered under GST due to their turnover being below the threshold limit.

3. Requirement for GST registration based on the aggregate turnover of co-owners:

The Appellant, along with other co-owners, jointly owned the property and received rental income. The total rental income exceeded the GST registration threshold, but the individual share of each co-owner did not. The Appellant argued that each co-owner should be considered separately for GST registration purposes.

The Appellate Authority agreed, citing previous rulings that co-owners should not be treated as an association of persons if their income is separately ascertainable and assessed individually for income tax. Therefore, each co-owner's turnover should be considered separately, and the Appellant, whose turnover is below the threshold, is not required to register under GST.

4. Entitlement to refund of TDS deducted:

The Appellant sought clarity on whether they would be entitled to a refund of TDS deducted by the Social Welfare Department. The MAAR had refrained from answering this question, stating it was outside the scope of Advance Ruling provisions under Section 97 of the CGST Act, 2017.

The Appellate Authority did not explicitly address this issue in their final order but implied that since the services are exempt from GST and TDS provisions do not apply, any TDS deducted may be subject to refund under the appropriate provisions of the GST law.

Conclusion:

The Appellate Authority set aside the MAAR's ruling, holding that the services provided by the Appellant to the Social Welfare Department are exempt from GST under Notification No. 12/2017-C.T. (Rate). Consequently, TDS provisions under Section 51 of the CGST Act, 2017, are not applicable. The Appellant is not required to register under GST as their individual turnover does not exceed the threshold limit. The appeal filed by the Appellant was allowed.

---