In re Ravindra Navnath Satpute (Dewoo Engineers) (GST AAR Maharashtra)
Maharashtra Authority for Advance Ruling (AAR) has ruled that the service of renting out a residential building by Ravindra Navnath Satpute (Dewoo Engineers) to the Social Justice and Special Assistance Department of the Government of Maharashtra for running a hostel for backward class girls is exempt from GST. Consequently, the provisions for GST Tax Deduction at Source (TDS) under Section 51 of the CGST Act, 2017, will also not be applicable.
The applicant sought a ruling on the GST applicability of renting out their immovable property to the State Government for the specific purpose of accommodating girls from backward classes in a hostel named “Sant Sakhubai Backward Class Girls Government Hostel.”
The AAR examined Sl. No. 3 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, which provides exemption for pure services provided to the Central Government, State Government, Union territory, or local authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution.
The AAR noted that the service provided (renting of immovable property) is a pure service to the State Government. The crucial point was whether this service relates to a function entrusted to Panchayats or Municipalities under the Constitution.
Referring to Articles 243G and 243W and the Eleventh and Twelfth Schedules of the Constitution, the AAR highlighted that these provisions entrust Panchayats and Municipalities with the responsibility for social welfare and the development of weaker sections of society, including women and girls from Backward Classes/Scheduled Tribes. Entries 25, 26, and 27 of the Eleventh Schedule (related to Panchayats) specifically mention “Women and Child development,” “Social welfare, including welfare of handicapped and mentally retarded,” and “Welfare of weaker sections, and of scheduled castes and the scheduled tribes.” Similarly, Entry 9 of the Twelfth Schedule (related to Municipalities) includes “Safeguarding the interest of weaker sections of society, including handicapped and mentally retarded.”
The AAR concluded that providing residential accommodation for girls from backward classes directly falls within the ambit of functions related to social justice and the welfare of weaker sections, which are responsibilities entrusted to Panchayats and Municipalities under the Constitution. Therefore, the renting of the property for this purpose qualifies for the GST exemption under the aforementioned notification.
The AAR also took note of a similar ruling by the Maharashtra Appellate Authority for Advance Ruling (AAAR) in the case of Shital Tukaram Dhole, which had set aside an earlier AAR ruling and held that renting property to the Social Justice Department for similar purposes is exempt from GST. The AAR also cited similar rulings from AAR Karnataka and West Bengal AAR.
Given that the service is exempt from GST, the AAR stated that the provisions for GST TDS under Section 51 of the CGST Act, 2017, would not be applicable to the rental payments made by the Social Justice Department.
The applicant had also raised questions regarding GST registration for joint ownership and disclosure of receipts, but these were withdrawn during the proceedings.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, MAHARASHTRA
