GST payable on renting of temporary residential rooms to devotees

In re Acharya Shree Mahashraman Chaturmas Vyvastha Samiti (GST AAR Telangana)

Q1. Whether Applicant is liable to pay tax on renting of temporary residential rooms for consideration to the devotees and renting of space for shops and stalls for the purpose of religious programmers where the predominant object is not to do business but for advancement of religion?       

Ans 1: Liable to tax only if the room rent per day is Rs.1,000/- or more as per Entry 13 of Notification 12/2017.

Q2. Whether Applicant is liable to pay tax on renting of temporary residential rooms as per the following categories, to the devotees to stay for the purpose of religious programs where charges per room is less than one thousand per day, if answer to the question 1 is yes?

Ans 2: Not liable as enumerated at Entry 13

Q3. Whether Applicant is liable to pay tax on renting of space for stalls, where the predominant object is not to do business but for advancement of religion if answer to the question 1 is yes?

Ans 3: Liable to tax only if the rent per month is Rs. 10,000/- or more.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TELANGANA

1. M/s. Acharya Shree Mahashraman Chaturmas Vyvastha Samiti, 2-3-530, D.V.COLONY, SECUNDERABAD, Hyderabad, Telangana, 500003 (36AAHTA8018M1ZE) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.

2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act.

3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act.

4. Brief facts of the case:

M/s. Acharya Shree Mahashraman Chaturmas Vyvastha Samiti is a charitable religious institution which is providing space for rent on temporary basis during chaturmas. As they are not truly doing this activity with a profit motive they are desirous of clarification regarding exigibility of their supplies to tax. Hence this application.

5. Questions raised:-

1. Whether Applicant is liable to pay tax on renting of temporary residential rooms for consideration to the devotees and renting of space for shops and stalls for the purpose of religious programmers where the predominant object is not to do business but for advancement of religion?

2. Whether Applicant is liable to pay tax on renting of temporary residential rooms as per the following categories, to the devotees to stay for the purpose of religious programs where charges per room is less than one thousand per day, if answer to the question 1 is yes?-

(i) Category-I, Premium 2 BHK 568.30 Sq Ft including facilities such as water, electricity, cot, bed, pillow, bedspread, Two Air Conditioned rooms, hall, kitchen, Two: toilets (One attached) With cooking facility and No cleaning services (Not charged given free of cost to the organizing members)

(ii) Category-II, Semi Premium 2 BHK 437.70 Sq Ft. including facilities such as water, electricity, cot, bed, pillow, bedspread, Two Air Conditioned rooms, hall kitchen, One toilets and one bathroom. With cooking facility and No cleaning services. (Not charged given free of cost to the organizing members)

(iii) Category-III, 2 BHK 437.70 Sq. Ft. including facilities such as water, electricity, cot, bed pillow, bedspread. Two rooms (One Air Conditioned room and another non air conditioned room), hall, kitchen, One toilets and one bathroom with cooking facility and No cleaning services

(iv) Category-IV, 1 BHK Cottage 232.80 Sq. Ft including facilities such as water, electricity, cot, bed, pillow, bedspread, one Air Conditioned Bed rooms, hall, kitchen, rest room + toilet. With cooking facility and No cleaning services.

(v) Category-V, Single Room Kutir…. Sq Ft, including facilities such as water, electricity, cot, bed, pillow, bedspread, having, one toilet attached No cleaning & cooking services.

(vi) Category-VI, Dormitory consisting 12 beds, including facilities such as water, electricity, Two AC, Cot, bed, pillow, bedspread common rest rooms and toilets. (Not charged given free of cost to the staff and working members in the premises.)

3. Whether Applicant is liable to pay tax on renting of space for stalls, where the predominant object is not to do business but for advancement of religion if answer to the question 1 is yes?

4. Whether Applicant is liable to pay tax on supply of food and beverages at subsidized rates to the devotees, where the predominant object is not to do business but for advancement of religion?

5. Whether Applicant is liable to pay tax on providing space for registered person without consideration for supply food and beverages to the devotees, where consideration received by registered person directly from devotees?

6. Whether Applicant is liable to pay tax for acting intermediary for booking hotel rooms to the pilgrims from outside?

6. Personal Hearing:

The Authorized representatives of the unit namely Sri Sanjay M Dhariwal & Sri Naresh Kathotia are Chartered accountants and authorized representatives attended the personal hearing held on 05-10-2021. The authorized representatives reiterated their averments in the application submitted and contended as follows:-

1. That they are a non-profit spiritual organization conducting religious camps across the country during ‘Chaturmas’ period. Such a camp was organized in the State of Telangana during the year 2020.

2. That in the course of organizing the camp they have rented temporary residential rooms to the devotees attending the camp and are desirous of clarifying the exigibility of GST on the consideration received from the attendees for supply of following services:-

a. Renting of temporary residential rooms.

b. Renting of space for stalls.

3. Further, the authorized representatives have offered to withdraw question no’s 4,5 & 6 as they are no more relevant because the supply of such services did not take place.

7. Discussion & Findings:

The applicant is a religious institution and is temporarily renting residential rooms for consideration and similarly they are also renting space for stalls for consideration. The understanding of the applicant is based on the pronouncement of Hon’ble Apex Court of India in the case of Commissioner of sales tax Vs Sai publication fund (2002) Appeal (civil) 9445 of 1996 [2002] 126 STC 288 (SC) wherein it was held that, where the main activity is not business, then any incidental or ancillary transaction, unless established by the revenue department to be an independent business transaction, will also be considered as charitable only and not business. Further it was also held that, where the main and dominant activity of the assesse trust in that case was to spread message of Sai baba, then brining out publications and sale thereof by the assesse trust to its devotees at cost price did not amount to business.

The Hon’ble Apex Court of India in that case has examined the facts in light of definition of dealer enumerated in Sec 2(11) and definition of business as given in Section 2(5A) of Bombay Sales Tax Act, 1959. The Hon’ble Apex court concluded that as it is evident from Sec 2(11), every person is not dealer but only those persons who carry on business by buying or selling goods are regarded as dealers and therefore the question of profit motive or no profit motive would be relevant only where person carries on trade, commerce, manufacture or adventure in the nature of trade, commerce etc., and therefore the Apex Court ruled in favour of the respondent M/s. Sai publication fund as eligible for exemption from tax.

This case was distinguished by the Hon’ble Apex court of India while deciding the case of Cochin Port Trust vs. State of Kerala (2015) 80 VST 341 (SC) and held that the definition of dealer Under Section 2(viii) of the Kerala General Sales Tax Act, 1963 is wide and specifically includes persons who have effected sale or transfer of goods irrespective of the said sale or transfer being in course of business or not. Therefore, the dictum of the Hon’ble Apex Court in the case of M/s. Sai publication fund [2002]126 STC 288 (SC) was held not applicable to Cochin port trust case. In the present case also the definition of ‘person’ in Sec 2(84) of the CGST/SGST Act is not limited to purchase and sale of goods only and therefore the findings of the Hon’ble Apex Court of India in Cochin port trust are applicable to the present case and hence the case law relied by the applicant is not a determining law as far as this application is concerned.

Further, Notification No. 12/2017 dated: 27.07.2017 extends exemption for services provided by an entity registered under Sec 12AA of the Income Tax Act on certain items at Entry 1 and other specific items at Entry 13. The Entry 1 of this notification reads as follows:-

“Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities.”

Similarly, Entry 13 reads as follows specifically with respect to renting out of religious precincts. Heading 9963 or Heading 9972 or Heading 9995 or any other Heading of Section 9,-

“Services by a person by way of-

(a) conduct of any religious ceremony;

(b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act:

Provided that nothing contained in entry (b) of this exemption shall apply to,-

(i) renting of rooms where charges are one thousand rupees or more per day;

(ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day;

(iii) renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month.”

Thus there are (2) Entries in the exemption notification 12/2017 pertaining to persons registered under Sec 12AA of the Income Tax Act. Whereas the Entry 1 is a general entry, the Entry 13 is a special entry covering renting of premises, rooms, shops etc., by a person registered under Sec 12AA of Income Tax Act.

The (5) member constitutional bench of Hon’ble Supreme Court of India in the case of Pankajakshi Vs Chandrika (2016) 6 SCC 157 has held that general things do not derogate from special things. The Apex Court of India in a catena of case law has held that the statute laying down general scheme of operation has to make room for a special statute for which a separate and exclusive field is carved out by the legislature itself. Therefore the special entry 13 will prevail while determining the eligibility for exemption for services supplied by a person registered under Sec 12AA of the Income Tax Act. Accordingly,-

a. Renting of rooms where charges from Rs.1000/- or more per day are taxable.

b. Renting of shops for business where charges are Rs.10,000/- or more per month are taxable.

8. In view of the observations stated above, the following ruling is issued :

Advance Ruling