18% GST payable on residential property leased out & used for commercial purpose: AAAR

Case Details: Appellate Authority for Advance Ruling, Andhra Pradesh Lakshmi Tulasi Quality Fuels, In re - [2022] 139 taxmann.com 434 (AAAR-Andhra Pradesh)

Judiciary and Counsel Details

• • Peeyush Kumar & Naresh Penumaka, Member

Facts of the Case

The appellant (lessee) entered into a lease agreement to lease out residential property. It sub-leased residential premises to individuals (including students) for purpose of temporary accommodation. It filed an application for advance ruling to determine whether supply of leasing service for ultimate use of rooms by students and professionals would be eligible for exemption. The Authority for Advance Ruling held that exemption would not be available to the appellant and it filed appeal against the order.

AAAR Held

The Appellate Authority for Advance Ruling observed that the benefit of exemption is available only where residential dwelling is used as residence. The lessee would be involved in business of sub-leasing of property and had no intention to use property as residence. Moreover, the intention of lessee to take property on lease for commercial and business purposes was evident from lease deed. Therefore, leasing services involving own or leased non-residential property would be classifiable under SAC 997212 and taxable at 18%.

List of Cases Reviewed

• • Lakshmi Tulasi Quality Fuels, In re [2020] 117 taxmann.com 942/81 GST 135 (AAR – A.P.) (para 4.8) affirmed.

List of Cases Referred to

• • Bandu Ravji Nikam v. Acharyaratna Deshbhushan, Shikshan Prasara Mandal 2003 (3) Bom. CR 210 (para 2)
  • Acharya Shree Mahashraman Chaturmas Pravas Vyavastha Samiti Trust, In re [2019] 110 taxmann.com 282/[2020] 77 GST 254 (AAA – Kar.) (para 2)
  • Elisabeth Blasi v. Finanzamt Munchen I [2012] 26 taxmann.com 312/37 STT 291 (ECJ) (para 2)
  • BJ Group Ltd. v. Commissioner of Customs & Excise [2013] 37 taxmann.com 457 (UKV – Duties Tribunals) (para 2)
  • General Manager Ordnance Factory Bhandara, In re [2019] 106 taxmann.com 246 (AAR – Mah.) (para 2)
  • Borbheta Estate (P.) Ltd., In re [2019] 106 taxmann.com 386/75 GST 234 (AAR – West Bengal) (para 2).