Rent Received from Govt. whether exempt

[Rajan Atrawalkar]

My client has rented his godown to District collectorate for storage of Agricultural produce and received rent against it. While making payment through bank transfer, the collectorate office has deducted 10% TDS and 2% GST. What will be the GST liability of my client? Does serial no 3. Of Mega Exemption Notification 12/2017 apply to it?

(3.) 12/2017 : “Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”

[KASTURI SETHI]

Sh.Rajan Atrawalkar Ji,

Whether your client is registered with GST department ?

[Rajan Atrawalkar]

Serial 5 of 13/2017 speaks about renting of immovable property by Govt. and recipient is any business entity. whereas in our case it is reverse of the same. Renting services provided by regd. business entity and recipient is Govt.

[Shilpi Jain]

The exemption in S. No. 3 is only if the services are provided to CG, SG or LA or Govt. entity, Govt. authority in relation to activities under article 243G/ 243W.

In this case does not seem so. Exemption is not applicable.

[Shilpi Jain]

Also, there are exemptions provided for storage services provided in certain cases, however, in your case it is renting services and not storage. So that exemption also seems inapplicable.

[KASTURI SETHI]

Exemption is not available. I agree with both views of Madam Shilpi Jain. Similar issue has been decided by AAR Haryana.

2019 (2) TMI 1002 - AUTHORITY FOR ADVANCE RULING, HARYANA - IN RE : AWLA INFRA

[Rajan Atrawalkar]

My interpretation of this entry is as follows:

Renting of property is “Pure Service” not involving goods

Office of the district collectorate comes under the Revenue department of State Government

The functions entrusted to a Panchayat under the Eleventh Schedule to Article 243G of the Constitution are as under:

(i) Agriculture, including agricultural extension ; and

(xxviii) Public distribution system.

Storage of Food Grains will squarely be covered under any of these two.

Hence exemption will be availble.

AI Summary

GST on rent from government: renting to a government office is taxable unless tied to functions entrusted to local bodies. Whether rent received by a registered business for leasing immovable property to a government office attracts GST and whether the exemption for services provided to government entities applies. One view rejects the exemption for renting of immovable property absent a connection to functions entrusted to local bodies and treats leasing as taxable; exemptions for storage do not cover renting. An alternative view argues that leasing for storage of agricultural produce could fall within entrusted functions like agriculture or public distribution and thus be exempt if so connected.