In re Sri. Taghar Vasudeva Ambrish (GST AAAR Karnataka)
In the instant case, the Lease Deed dated 21st June 2019 evidences that a property has been rented/leased to M/s DTwelve Spaces Pvt Lt by the Lessors (the Appellant being one of the lessors) who are also the owners of the said property. The Appellant claims that the property which has been leased to the lessee is a residential property and has put forth evidences in the nature of sanctioned building plan and Katha extract to substantiate the same. They have also relied on several judicial pronouncements to emphasise that a “residential dwelling” is a place where people live or stay for a considerable period of time. We take note of the fact that the Notification No 09/2017 IT (R) as well as the GST law does not define the term “residential dwelling”. However, we refer to the CBIC Education Guide dated 20 June 2012 which gives clarifications in the context of Service Tax laws wherein it is mentioned that in the absence of a definition of the term “residential dwelling”, one has to interpret the same in terms of normal trade parlances 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. In the case before us, we find from the records submitted by the Appellant that, the impugned property was constructed as Hostel building. The project description in the sanctioned plan submitted to us indicates that the plan is for the construction of a hostel building. Can a hostel building be called as a residential dwelling? A common understanding of a hostel is that of an establishment which provides inexpensive accommodation to specific categories of persons such as students, workers, travellers. On the other hand, a common understanding of the term “residential dwelling” is one where people reside treating it as a home. We find that the Appellant has constructed the building with the intention of providing hostel accommodation which is more akin to sociable accommodation rather than what is commonly understood as residential accommodation. Therefore, we conclude that the impugned property cannot be termed as “residential dwelling”. Once the impugned property is not a residential dwelling, the exemption under Sl.No 13 of Notification No 09/2017 IT (Rate) dt 28.06.2017 will not apply to the renting/leasing of such property.
FULL TEXT OF ORDER OF GST AAAR Karnataka
PROCEEDINGS
(Under Section 101 of the CGST Act, 2017 and the KGST Act, 2017)
1. At the outset we would like to make it clear that the provisions of CGST, Act 2017 and SGST, Act 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act.
2. The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as CGST Act, 2017 and SGST Act, 2017) by Sri. Taghar VasudevaAmbrish, No 8/2, 36th Cross, 11th”A” Main, 4th T Block, Jayanagar, Bengaluru(herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 17/2020 dated: 23rd March 2020.
Brief Facts of the case:
1. Taghar Vasudeva Amrish (herein after referred to as “the Appellant”) along with four others namely, Mrs. M. C. Nagarathna, Mr. T. V. Ambarish, Mr. T. V. Nagaraj & Mr. T.V. Anjan (”joint owners “) have collectively leased out a multi-storied property constructed at site bearing no. 14, formed in converted Survey No. 68 (Old Survey No. 67), situated at ‘Agugodi village, Begur Hobli, South Taluk, Banglore ‘ to M/s DTwelve Spaces Pvt. Ltd. (“the lessee “).
2. The property which has been leased out by the Lessors comprises of a stilt floor (having two rooms) plus ground and four floors with each floor having 8 rooms. The Appellant is the sole and absolute owner of the stilt and ground floor in the building. The first, second, third and fourth floor of the said building is owned solely and absolutely by Mrs. M. C. Nagarathna, Mr. T. V. Ambarish, Mr. T. V. Nagaraj & Mr. T.V. Anjan respectively.
3. The Appellant along with the other four owners have jointly entered into a Lease Deed Agreement with the Lessee on 21st June 2019 in terms of which the above said multi-storied property is leased out for a period of 9 years to the lessee for a consideration of Rs 5,40,000/- per month. The monthly rent is paid to the respective accounts of the lessors in an agreed percentage. The Lessee has obtained the said property on lease for the purpose of sub-leases/sub-licences such residential premises to individuals (including students) for the purpose of long-stay accommodation.
4. The Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following questions:-
“1. Whether exemption prescribed under entry number 13 of notification no. 9/2017-integrated tax (rate) dated. 28th June, 2017 can be sought and the lessors (here Ambrish Vasudeva and 4 others) need not charge GST while issuing the invoice for the lease service to M/s. DTwelve Spaces Pvt ltd.
2. Whether the lease service falls under the Exemption prescribed and can be described as “Services by way of renting of residential swelling for use as residence ” as listed in the aforesaid Notification? “
5. The AAR vide its order dated 23rd March 2020 gave the following ruling:-
“1. The exemption prescribed under entry no. 13 of notification no. 9/2017-integrated tax (rate) dated. 28th June, 2017 cannot be sought and the lessors (as an entity) have to charge GST while issuing the invoice for the lease services to M/s DTwelve Spaces Pvt Ltd, provided they are registered under the GST Act.
2. The lease services does not fall under the exemption “Services by way of renting of residential dwelling for use as residence” as listed in entry 13 of notification no. 9/2017-integrated tax (rate) dated. 28th June, 2017. “
6. Aggrieved by the said ruling, the appellant has filed this appeal on the following grounds.
6.1 The observations of Ld. Authority of Advance Ruling, Karnataka vide Order dated 23 March 2020 to arrive at a conclusion that services of Appellant are not covered under exemption entry are as follows:-
