Case-: Borbheta Estate (P.) Ltd.,  106 taxmann.com 386 (AAR-WEST BENGAL)
Applicant has executed agreements for leasing/renting of four dwelling units it owns at different locations in Kolkata. According to the agreements, all of these units are to be used for residential purpose. Three flats have been rented to individuals and one flat (Flat No. 4H, Tower III, South City, Prince Anwar Shah Road, Kolkata – 700068) has been let out to M/s Larsen & Toubro Ltd.
Query 1: Whether supplier is liable to pay GST on renting or leasing of dwelling units for residential purpose?
Query 2: What would be the impact on the taxability if the dwelling units are rented to commercial entity like M/s Larsen & Toubro Ltd although for the purpose of residence of their employees?
3. Contention of the Applicant-
Applicant argued that he is not liable to pay tax on leasing or renting of dwelling units, as they are all let out for residential purpose, and services by way of renting of dwelling units for residence is exempted under Sl. No. 12 of Notification No. 12/2017-CT (Rate) dated 28-6-2017 (corresponding State Notification No. 1136 – FT dated 28-6-2017), as amended from time to time (hereinafter the Exemption Notification).
4. Observation by AAR:
Residential Society confirmed that dwelling Units can be used for Residential Purposes only and no commercial use allowed-AAR observed that dwelling units rented to individuals, as described in relevant contracts, are meant for residential accommodation. Dwelling unit rented to M/s Larsen & Toubro Ltd is a flat in the housing complex named South City. The South City Apartment Owners’ Association certified that Applicant owned the flat and it is a residential flat and cannot be used for any other purpose. The said association further confirms that an employee of M/s Larsen & Toubro Ltd is staying at the flat.
Observation about the relevant entry: The Applicant’s service is classifiable as rental or leasing service involving own/leased residential property (SAC 997211). Applicability of Sl. No. 12 of the Exemption Notification depends upon whether the dwelling unit is used as residence.
Conclusion by AAR:-AAR observed that documents produced reveal that all the dwelling units are being used for residence, irrespective of whether they are let out to individuals or a commercial entity. The Applicant’s service of renting/leasing out the dwelling units for residential purpose is, therefore, exempt under Sl. No. 12 of the Exemption Notification.
The Applicant’s service of renting/leasing out the dwelling units for residential purpose, as described in para no. 4.1, is exempt under Sl. No. 12 of Notification No. 12/2017-CT (Rate) dated 28-6-2017 (corresponding State Notification No. 1136 – FT dated 28-6-2017), as amended from time to time. The Applicant is, therefore, not liable to pay tax on supply of such service.
A welcome ruling going more on the entry and its interpretation and substance of transaction rather than superficial view of involvement of commercial entity. The decision lays down that irrespective the fact that the dwelling unit is being let out to commercial entity but since it would be used for residential purposes of employees and further confirmed by the society, exemption would be available to the supplier.