TaxTMI 
TaxTMI 
2020 (11) TMI 1040
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....vance Ruling No. AAR No.12/AP/GST/2020 dated 05.05.2020 issued by Authority for Advance Ruling, Andhra Pradesh. 1. Background of the Case: 1. M/s. Lakshmi Tulasi Quality Fuels, a sole Proprietorship firm of Dumpala Rama Thulasi (herein after referred to as "the Appellant") is engaged in supply of petroleum oils and lubricants. The Appellant is duly registered vide registration No.37ALMPD5548B1Z7 for payment of Goods and service tax in respect of the above mentioned services. 2. The appellant is also the absolute and sole owner of a building located at Plot No.67, Padmashree Gardens, Vattinagulapally, Rajendra Nagar, R.R. Nagar, Telangana. The said building is constructed on a residential land consisting of stilt, ground floor, first and second floors. 3. The appellant entered into a lease agreement dated 31^st July 2019 with D-Twelve spaces private Limited (herein after referred to as "Lessee") to lease out the property as mentioned. The Lessee is a company incorporated under the provisions of the Companies Act, 2013 inter alia engaged in the business of running, managing and operating the day to day affairs of residential premises and sub-lease of such residential prem....
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....ing: Paragraph 2(zx) of the Exemption Notification defines the term "Renting of Immovable Property". It is an undisputable fact that services of renting of immovable property have de facto been provided by Appellant to the lessee covered under definition of Section 7 read with Entry No. 2 (b) of Second Schedule of CGST Act, 2017; b) The property so let out must be a residential dwelling- * Residential Dwelling was defined under erstwhile Service Tax law vide Para 4.13.1 of "Taxation of Services: An Education Guide" dated 20th June, 2012 published by Tax Research Unit, one of the Wings under CBIC (then CBEC) wherein it has been defined as 'any residential accommodation, but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay'; * In the present matter - • The Leased Property is constructed upon a residential land - Lease Agreement dated 31st July, 2019. • In the records of Municipality itself, the usage of property so rented out to the Appellant to lessee has been listed as 'residential' (building usage) - Property Tax Assessment Details downloaded f....
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....ations of Telangana also provides that a hotel, lodging and boarding houses, etc. cannot be operated in residential land zone rather is permitted in the area notified as commercial use zone. Whereas the area in which the property under consideration is situated is classified as residential land use zone and as per the Zoning Regulations, 'hostels' can be operated in such zone after obtaining prior approval from competent authority (which has been duly obtained by the lessee in the present matter); * Billing pattern of both the services, i.e. per day tariff as compared to monthly rent also substantiate the fact that the nature and duration of stay is different for these two services; * Also, where hotel, motel, inn, guest house, etc. usually caters to travellers/tourists, impugned hostel is not meant for any traveller/tourist, rather is meant for only such students or working professionals who wish to stay with a permanence; and, * Furthermore, in the matter of Bandu Ravji Nikam v. Acharyaratna Deshbhushan, reported in 2003 (3) Bom CR 210; 2003 (3) MhLj 472, it was held that "Undoubtedly, "hostel" is nothing but a house of residence or lodging for ....
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....mmodation' or 'permanency' as against the accommodation provided by the hotels, inn, guest house, etc. where people (travellers, tourists, etc.) stay only for a few days maximum. Thus, services rendered by the Appellant are covered under Entry No. 13 of exemption notification as it fulfils all the conditions. B. Judicial pronouncements laying down some principles for this exemption under consideration (entry no. 13) a) In Re: General Manager Ordnance Factory Bhandara, cited in 2019 (26) G.S.T.L. 423 (A.A.R.- GST): Property was given as residence by employer, i.e. Applicant to its employees and the rent so collected was ascertained as exempt by the Ld. AAR. Impugned renting is also similar where only difference between the two being instead of property being rented out by employer, in the present case, it is being rented out by the Lessee itself whereas rest of the components of renting remains same, i.e. for working professionals and for use as residence. b) In Re: Borbheta Estate (P.) Ltd., cited in 2019 (106) taxmann.com 386 (A.A.R. - West Bengal): One property was rented out to a commercial entity (M/s L&T Ltd.) for residential ....
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.... b. For reference, Delhi Government in the year 2017 vide Order bearing No. F.11/90/2017/Power/3687 dated 21' December 2017 extended the provisions of Electricity subsidy to individual lawyers having their chambers inside all the Court Complexes in NCT of Delhi through a Special Subsidy Scheme. Through this Scheme, such Lawyers Chambers shall be charged tariff from erstwhile Non-Domestic tariff category to Domestic tariff category for F.Y. 2017-18 w.e.f. 01' October, 2017. It cannot be said that subsequent to this Order, Lawyers chambers inside the Court Complexes are covered under residential zone or will be called as residential property since electricity tariff was subsidized to Domestic category. d) Lessee is engaged in commercial activity of renting of rooms: It is a well settled proposition that if an activity is exempted by way of exemption notification, such activity falls under definition of 'supply' given in Section 7 of CGST Act, where Section 7 of CGST Act, 2017 provides that all such transactions/activities are covered (and ultimately chargeable to GST) which are made in the course or furtherance of business. Thus, definition of 'S....
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....per the "Lease Deed" executed by the appellant with M/s. D-twelve Spaces Private Limited, the appellant has let out her building at Plot No.67, Padmashree Gardens, Vattinagulapally, Rajendra Nagar, R.R. Nagar, Telangana on a monthly rental basis of Rs. 7,20,000/- that consists of 73 rooms with all amenities like exhaust fans, geysers, lights and fittings, sanitary fittings, etc., provided by the Lessor and the lessee shall pay all operational costs to the lessor based on the invoice or the bill issued by the relevant authorities. As per Clause 13, the Lessee shall have the right to engage with third-party service providers for all activities required for the purpose including food catering, hospitality, security, cleanliness, event organization, transportation, management and supervision of the Total Property as deemed necessary by the Lessee for the Purpose. 4.3 To reiterate, the contract of supply of service of leasing of real estate property is between the Appellant and M/s. D-Twelve Spaces Private Limited. There is no dispute that this transaction is a taxable GST supply. However, what is in question is whether this transaction is exempted from GST in terms of SI. No. 13 of ....
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....ntain a household. It also means a mobile home regardless of ownership of the land." It is evident from the above reading, that the property under question is not a home or residence being used by a family in a conventional sense or a group of members maintaining a regular house hold, but used for commercial purposes of accommodating students or working professionals in bulk numbers for a temporary period of stay. The appellant has referred to a series of definitions, and has pointed out the existence of the words "residential" or "residence" in various licenses, agreements, etc., in their grounds of appeal. But the mere existence of the word or words "residential" or "residence" does not change the character of the property under lease. 4.5.2 In their appeal, the Appellant stated in para A.19 (e) "Also, the Sanctioned Plan dated 26Ih September 2017 for the Leased Premises, clearly demarcates the master Bedroom, Guest Bedroom, Pooja Room, Kitchen and Hall, etc. on each floor of the captioned property. It also depicts that the said Leased property is constructed as Residential property." However, as per para 2.4 of the Lease Deed dated 31.07.2019 it is stated "2.4 The....
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....r ready reference. 10.3. Subject to Clause 10.1 (Municipality Costs and Taxes), the Lessee alone shall be liable to make the payment of all taxes, cess, assessments, duties and other charges of similar nature applicable on the business carried by the Lessee on the Total Property. (ii) Clause 12 Right to Sub-Lease: ...Lessee shall have the sole and absolute right to charge rent or/and premium from such sub-Leases ... further clause 12.4 covenants ... Lessor shall not have any claim over the rent ... charged by the Lessee under Clause 12.3. This clearly indicates that the Lessee was in to the business of sub-Leases and that they would charge a rent or premium that would be retained wholly by the Lessee. This clearly shows the commercial nature of the transaction and that the property was not to be used as "residence" by the Lessee. The relevant extract is reproduced for ready reference. 12.3. The Lessee shall have the sole and absolute right to charge rent or/and premium from such sub-lessees or/and sub-licensees at such rates as the Lessee desires from time-to-time. 12.4. The Lessor(s) shall not have any claim over the rent or/and premium charged ....