The Karnataka Appellate Authority of Advance Ruling (AAAR) while upholding the AAR’s ruling held that there is no GST exemption on leasing of immovable property in the nature of hotel, inn, guest house.
The Appellant, Taghar Vasudeva Ambrish is a proprietary concern registered under the provisions of the Goods and Services Act, 2017. The applicant states that he is engaged in the business of providing affordable residential accommodation to students on a long term basis, which starts from 3 to 11 months.
The applicant sought advance ruling on the issue 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 need not charge GST while issuing the invoice for the lease service to M/s. Dtwelve Spaces Pvt. Ltd.
The other issue raised was 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 Notification.
The Karnataka AAR ruled that 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.
The AAR further ruled 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 13 of Notification No. 9/2017 Integrated tax (Rate) dated 28th June 2017.
However, the applicant was not satisfied by the ruling of the AAR and stated various grounds for the same.
Firstly, the intended purpose for which the building was constructed, and the layout plan has been passed is residential in nature. Reference is made to Layout Plan (LP) approved by the Assistant Director of Town Planning (South). Bruhat Bangalore Mahanagara Palike wherein plot use as well as land use zone has been categorically mentioned as Residential’ multiple times in the plan. Even in the table containing ‘Total FAR Built Up Area Statement the entire FAR belongs to the residential area.
Secondly, the Khatha Extract shows the property as ‘residential’ in the books/records of Bruhat Bangalore Mahanagara Palike (BBMP).
Thirdly in the Lease Deed, the property which has been rented out to the Lessee is repeatedly referred to as a residential property.
The AAAR consists of D.P. Nagendra Kumar and M.S. Srikar rejected the contention of the appellant and held that there is no GST exemption on leasing of immovable property in the nature of hotel, inn, guest house.
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