TaxTMI 
TaxTMI 
2023 (12) TMI 510
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the said property and pays property tax to the BBMP; the said building is suitable for residential purposes, layout of the property, its structure, design and the plan of the property, sanctioned by the local authorities, is for usage as residential building. 3. In view of the above, the applicant has sought advance ruling in respect of the following questions: a. Whether renting of residential dwelling to the students and working women for residential purpose along with amenities and facilities such as food, furniture, appliance, cleaning, security, pest control etc., on monthly rental basis, is exempt under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 or not? b. If applicant transaction is not exempt, then what is the GST rate? c. If applicant transaction is taxable, whether applicant can claim ITC on input used for providing taxable service? 4. Admissibility of the Application : The applicant claimed that the questions on which advance rulings have been sought are with regard to "Applicability of a notification issued under the provisions of the CGST Act 2017", "Admissibility of input tax credit of tax paid or deemed to have been paid" an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ackup, house keeping, security and RO drinking water. 6. Applicant's Interpretation of Law : The applicant furnished their interpretation of law, which is as under: 6.1 The applicant quoting scope of supply in terms of Section 7(1)(a) of the CGST Act 2017 and definitions of Outward Supply, under Section 2(83); services under Section 2(102); Land and Building in terms of Para 2 of Schedule II to Section 7; Recipient, under Section 2(93); Composite Supply, under Section 2(30); Principal Supply, under Section 2(90); Entry No. 12 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, by which the services by way of renting of residential dwelling for use as residence, covered under SAC 9963 or 9972 are exempted, both original as well as amended by Notification 04/2022-Central Tax (Rate) dated 13.07.2022 submits that contract for renting of residential dwelling along with facilities is a composite supply of renting service, the Principal Supply is renting of residential dwelling, other facilities are incidental to the renting of dwelling unit, Renting of residential dwelling is classified as supply of service in terms of para 2 of Schedule II to Section 7 of the CGST....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e * A permanent or settled inhabitant of a town, district etc., "Renting" 'Renting' has been defined in section 65B of Service Tax Law as "allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. "Residential Building" The Education Guide issued by CBEC in 2012 clarified that the said term has to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay. Despite such clarification, application of the same in context of hostels was still not clear Karnataka Municipalities building Bye-Laws 2017 Section 2, Definitions (21) 'Building'- means a Building defined in clause (3) of section 2 of the Act. Types of Buildings based on use of premises or activity: 'Residential Building'- includes a building in which sleeping and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der entry no. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017. 6.3 Analysis of Second essential requirements of entry 12 of notification 12/2017 CTR as under; Applicant submits that, mere renting of residential dwelling is not sufficient for claiming exemption. The latter part of the action i.e., use of such residential dwelling should be for residence. "for use as residence" The word "as" means, "as it is" without any change. Therefore, in order to claim exemption under notification no. 12/2017, the recipient of service should use the residential dwelling for residential purpose. The rented dwelling unit is said to be used as it is when the user/resident/tenant enjoys the place for personal living and such residential dwelling is not used for business purpose in any manner. Further, it is important examine whether the word 'Residence' used in the exemption entry is for shorter period or longer period? * Cue in this regard can be taken from the erstwhile service tax law wherein, section 65(105) of the Finance Act, 1994 (prior to 2012), provides the definition of taxable service for services provided by hotels, inns, etc., which generally involves s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enting of residential dwelling without intention to reside permanently or not. The exemption entry specifies, services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person". 6.8 Applicant submits that for better understanding of the exemption entry it is important to refer entries which are taxable for other renting services, which are re-produced as under; Entry No.7(i) of Notification No. 11/2017 dated 28.06.2017 Central Tax Rate, specifies renting of a unit of accommodation in hotel. Comment: Essential element of this entry are (a) renting of a unit and not the whole building; (b) consideration on per day and per unit basis; (c) renting of such unit located in building which is commercial in nature Though the entry does not mention about purpose. Generally, hotels provide renting of rooms for staying shorter period of time. Entry No. 7(ii), (iv) (viii) of 11/2017 Notification, specifies renting of a unit of accommodation in hotels, inns, guest houses, clubs, campsites of other commercial places meant for residential or lodging purpose. Comment: Essential elements of this entry are (....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....12 Applicant wishes to place reliance on Hon'ble Supreme Court decision in the case of S.P JAIN Vs KRISHNA MOHAN GUPTA & ORS, 1987 AIR 222, 1987 SCR (1) 1986, Dt: 04/12/1986, (Refer Enclosure - 6) wherein it was observed that in this connection reference may be made to the meaning of 'dwelling house' in Corpus Juris Secundum Vol, 28 pages 604-605 where dwelling place is mentioned. See also in this connection 'dwelling' or 'dwelling house' where it was mentioned that the term was not free from ambiguity, multiple meanings and many definitions have been given. The meaning must suit the purpose and the idea behind the statute in question in a particular case. For the meaning of 'dwelling house' it may be instructive to refer to the Words and Phrases Legally Defined Second Edition, Volume 2 page 127 wherein it has been mentioned, inter alia, that 'dwelling House' meant a building used or constructed or adapted to be used wholly or principally for human habitation and 'dwelling house' included any part of a house where that part was occupied separately as a dwelling house. 6.13 Hon'ble Income Tax Appellate Tribunal in PRMOD SAHAI....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that, In India, the Act applies to residential premises let out to a company also. Although, the word "residence", in its strict sense, by itself, is inappropriate with regard to a company yet, for purposes of the Act, there is nothing inappropriate in a company entering into a lease in respect of premises let for use as a residence. Indeed, the appellant company did take the demised premises for residential purposes only, and it is fighting the present appeal to protect the possession of these very premises. In the context of Clause (h), the use of the phrase 'a residence' does not appear to us to be a cogent reason for holding that this clause does not apply to a company. 6.16 Applicant is of the view that the principles laid down by Courts (supra) makes it clear that for claiming exemption it is sufficient that renting (i) part of residential house, (ii) for physical habituation, (iii) need not be permanent, (iv) for considerable length of time, (v) for individuals and (vi) for use other than commercial purpose, applies to the Applicant's transaction, therefore Applicant is not liable to pay GST. 6.17 Applying the above principles to the present ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... property; provides three types of renting services of units having capacities of single occupancy, double occupancy and triple occupancy, on monthly rental basis with the following facilities. * Cot with mattress, table with chair and cupboard with locking facility, one light and one fan per room and attached bathroom * Breakfast, lunch, dinner and evening tea/snacks, laundry, power backup, house keeping, security and RO drinking water. 11. The applicant submitted that they charge the inhabitants monthly rent in accordance with the type of occupancy as given below, along with Annual Maintenance Charges of Rs. 4,000/- per annum per person for double and triple sharing and Rs. 6,000/- per annum per person for single occupancy and also refundable security deposit of Rs. 13,000/- per person. a) Rs. 19,000/- for single occupancy per person b) Rs. 13,000/- for double occupancy per person c) Rs. 9,000/- for triple occupancy per person 12. In view of the above the applicant sought for advance rulings in respect of the questions mentioned at para 3 supra. We proceed to consider one question at a time. The first question is Whether renting of residential dwelling to the students....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 12/2017-Central Tax (Rate) dated 28.06.2017. In view of the said claim, the core issue before us to decide is whether the accommodation being provided by the applicant to the inhabitants qualify to be a residential dwelling, for use as residence and thus qualifies for GST exemption or not. 15. We observe that the term 'residential dwelling' is neither defined in the Notification nor in the CGST Act 2017/ rules made there under. However the Education guide on Taxation of services, issued by the CBIC under erstwhile Service Tax Law, at para 4.13.1 while answering the question "What is a 'residential dwelling'?" directed to interpret the term 'residential dwelling' in terms of the normal trade parlance, as per which it is a residential accommodation, but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay. Therefore it could be inferred from the above that residential dwelling is a residential accommodation meant for permanent stay and does not include guest house, lodge or like places. A residential accommodation to qualify for permanency of stay would typically have at least one room for ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion to others: a) The resident/inhabitant agrees to avail the services offered by the service provider (applicant) at the unit within the premises, (para-1) b) The minimum term of the RSA is 10 months (para-4) c) GST shall be payable over and above the accommodation service charges (consideration for the service) and Annual Maintenance Charges inclusive of GST if applicable (para-5) d) The end use of the premises is for long term shared residential accommodation. The resident/inhabitant shall occupy a designated unit and use the designated space along with the furniture and fixtures present in the premises. Resident shall not make any structural or physical changes to the unit or the premises under any circumstances, (para-7) e) Following facilities are made available to residents during their residential period- Cot with mattress, table with chair and cupboard with locking facility, one light and one fan per room and attached bathroom; Breakfast, lunch, dinner and evening tea/snacks, laundry, power backup, housekeeping, security and RO drinking water(Para-8) f) Resident shall pay a monthly rent for an unit (para-10) g) Residents are not allowed to cook in their unit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the issue dealt/covered in the WP No. 14891/2020 by the Hon'ble High Court of Karnataka was about the renting of the residential premises to a lessee company whereas in the instant case the issue is renting of the partitions/units of immovable property by arranging cots with common bathroom. Thus the issues are different and hence the Hon'ble High Court of Karnataka's judgment is not squarely applicable to the instant case. 21. In view of the above, we find that the services being provided by the applicant do not qualify for exemption under SI No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended. 22. Now we proceed to consider the second question i.e. If applicant transaction is not exempt, then what is the GST rate? The applicant sought advance ruling with regard to the rate of GST on the services being provided by them if their services are not exempted. It is essential to classify the impugned services to arrive at the applicable GST rate. In this regard we invite reference to The Explanatory notes for the said Scheme of Classification of Services so as to arrive at the classification of the impugned service. The relevant SAC is app....