It is held  in Re Sri. Taghar Vasudeva Ambrish (GST AAR Karnataka),  that leasing of immovable property for Paying Guest Accommodation cannot be treated as renting of residential dwelling and is not exempted from GST.

In this article , an attempt has been made to simplify the contents of Advance Ruling and explain  the term ‘Residential dwelling ‘ for exemption under GST

Facts :- Sri. Taghar Vasudeva Ambrish is a proprietary concern registered under GST. The applicant along with four others collectively  has  let  out  a  Residential complex to M/S D. Twelve Spaces Pvt. Ltd which is engaged in the business of providing  affordable  residential  accommodation  to  students  on  a  long  term basis (starting from 3 to 11 months).

Along with such accommodation, the Company is also engaged in providing a host of other services such as maintenance, food, Wi-Fi etc. generally  called as Paying  Guest Accommodation.

M/s. D Twelve Spaces Pvt. Ltd. Has entered into sub  lease  agreement with students for providing residential accommodations with living amenities, security, entertainment facilities for a long stay for a period varying from 3 months to 11 months. Thereby, D Twelve has concluded that the rental accommodation services provided by D Twelve to the students will not attract GST. Consequently, there would be no GST obligation on D Twelve in case of lease arrangement with their lessor too (Here Ambrish Vasu deva and 4 others).

Therefore, D Twelve is of the opinion that the lessor should not charge GST to D Twelve when issuing the invoice for the lease service.

The applicant sought Advance Ruling on this issue. He refers to the Notification No. 9/ 2017-Integrated Tax (Rate) dated 28′”June, 2017 in which certain exemptions have been prescribed for specified activities. Entry 13  of  such  Notification  provides  that:  “Services  by way of renting of residential dwelling for  use  as  residence”  are  exempt  from GST.

Advance Ruling by AAR Karnataka: It has been held by Authority for Advance Ruling (AAR) Karnataka that rooms to paying guest ,though given  on  rent  for residential purposes would not amount  to  residential  dwelling  and  hence  the  entry  is not applicable for the transaction.

Detailed Statement of AAR ; Entry 13. Heading 9963 or Heading 9972 (Services by way of renting of residential dwelling for use as residence) is related to “renting of residential dwelling for use as residence”. The contract of the applicant group with the Company is verified and found that what is given is an immovable property consisting of only rooms with  attached  toilets as  per the  Layout  of  the leased  premises  annexed  to the  Lease agreement  and  does  not fit into the meaning of a dwelling which means a house. They are like hotel rooms and the entire leased premises has 42 rooms, which can by no imagination be termed  as  a  residential dwelling. Even if the  same is  given  for  residential  purposes,  the services  provided  is not for use as  residence  by the  lessee.  Services  by a  hotel,  inn,  guest  house,  club site or campsite, by whatever name called, or other commercial places for  residential  or lodging purposes are covered by different entries in the schedule of this notification or under different notifications and this shows that rooms though given on  rent  for residential purposes would not amount  to  residential  dwelling and  hence  the entry  is not applicable for the transaction of the lessor with the lessee.

Thus it is held that 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 l3  of  Notification No.9/ 2017  Integrated tax (Rate) dated 28* June 2017.

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