In re Lakshmi Tulasi Quality Fuels (GST AAAR Andhra Pradesh)
Appellant has let out her building 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.
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 Heading 9963 or Heading 9972 of Notification No.9/2017 (Integrated Tax) (Rate) Dated 28.06.2017. The relevant portion of the said Notification is extracted herein below for ready reference:
| SI. No. | Chapter, Section, Heading, Group or Service Code (Tariff) | Description of Services | Rate (per cent.) | Condition |
|---|---|---|---|---|
| (1) | (2) | (3) | (4) | (5) |
| 13 | Heading 9963 Or Heading 9972 | Services by way of renting of residential dwelling for use as residence. | NIL | NIL |
The Ld. AAR, Andhra Pradesh, had clearly brought in its Order AAR No. 12/AP/GST/2020 dated 05.05.2020 that for the exemption to apply, the following conditions are to be satisfied:
(i) There must be a service of renting
(ii) of a residential dwelling
(iii) for use as residence.
The Appellant has also laid out its appeal on the same lines as stated above. The Lease Deed dated 31.07.2019 stands testimony to the fact that the lessor (The Appellant) and the Lessee (M/s. D-Twelve Spaces) have entered into an agreement to let out and to take the property mentioned above on lease. As per Clause 2(b) of Schedule II to the CGST Act, 2017 “(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.”
Further, Renting in relation to immovable property is defined at 2(zz) of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as, (zz) “renting in relation to immovable property” means allowing, permitting or granting access, entry, occupation, use 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;”
As such, there is no doubt that the service rendered by the appellant is that of renting of immovable property.
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH
(Under Section 101 of the Central Goods and Service Tax Act and the Andhra Pradesh Goods and Service Tax Act).
At the outset, we would like to make it clear that the provisions of both the CGST Act and the APGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the APGST Act.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and APGST Act”] by M/s. Lakshmi Tulasi Quality Fuels (herein after referred to as the “Appellant”) against the Advance 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 N0.37ALMPD5548B1Z7 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 31st 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 premises to individuals (including students) for the purpose of accommodation. The appellant is also responsible for providing the leased property along with the fittings and fixtures mentioned.
4. In consideration of the lease of the premises by virtue of Lease Agreement dated 31st July 2019, the lessee is required to pay to the appellant a monthly rent of Rs.7,20,000/- (Rupees Seven Lakh and Twenty Thousand only) and all operational costs such as electricity, telecom and water charges as per the actual meter reading or based on the invoice, or the bill issued by the relevant authorities. Moreover, the lessee has the right to sub-lease the aforesaid property during the lease term to any third party with prior intimation to the appellant for the purpose.
5. The property so leased out has been finally used by the lessee for providing accommodation to students for 11 or 12 months, along with other amenities/facilities, like security, internet, food, electricity, etc.
6. In respect of the above stated transaction, the Appellant had filed an application for Advance Ruling before the Authority for Advance Ruling on the following question:
Whether the applicant is eligible for exemption under SI.No.13 of Notification No.9/2017 – Integrated Tax (Rate) dated 28.06.2017 in respect of the activity of renting out a residential building to a company for the purpose of long- term residential accommodation?
The Authority for Advance Ruling Andhra Pradesh in its orders in Advance Ruling No. AAR NO.12/AP/GST/2020 dated 05.05.2020 held:
a) The classification of service provided by M/s. Lakshmi Tulasi Quality Fuels, is covered under SAC 997212 and hence under entry no.16 of Notification No.8/2017 (Integrated Tax) (Rate), Dated: 28.06.2017, liable to IGST @ 18%.
b) The entry No. 13 of Notification No.9/2017 (Integrated Tax) (Rate) Dated 28.06.2017 – “services by way of renting of residential dwelling for use as residence” is not applicable to the present case on hand.
7. Being aggrieved by the said order pronounced by the Ld. AAR, the Appellant files the present appeal on the basis of the following grounds, which are independent and without prejudice to each other.
2. Grounds of Appeal:
A. Services rendered by the appellant are covered under entry no. 13 of exemption notification as it fulfills all the conditions.
a) It must be a service of renting: 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-
