The Karnataka Authority of Advance Ruling (AAR) in its ruling in the case of Bishops Weed Food Crafts Pvt. Ltd has held that the leasing of property for use as residence along with basic amenities like maintenance, security, and housekeeping is a composite supply of accommodation services under GST.
Further, it was held that exemption under entry no. 12 of Notification 12/2017 (Rate) dated June 28, 2017, in regard to renting of residential dwelling would not be applicable rather entry No. 14 in regard to accommodation services by the hotel, etc would be applicable.
Facts of the case:
- The applicant, Bishops Weed Food Crafts Pvt. Ltd. is engaged in the business of the provision of services by way of Leasing of residential units for use as residence to Tenants.
- It provides the residential dwelling with basic amenities such as maintenance, security and housekeeping as a comprehensive bundle. The charges are fixed are fixed for each month. the tenant does not have the option to select individual supplies from bundle.
- It further engaged in provision of services of leasing of residential units to other service providers who are engaged in subletting the residential unit for use as residence.
Issues on which Ruling was sought:
- The applicant has sought the advance ruling on the issue whether leasing of property for use as residence along with basic amenities would qualify an composite supply under Section 2(30) of the Karnataka Goods and Services Tax Act, 2017.
- The applicant has further asked that whether renting of property by Applicant is covered under entry 12 of the exemption Notification 12/2017 (Rate) dated June 28, 2017. If the answer to this is negative, whether services by the Applicant are covered under entry 14 of the exemption Notification 12/2017 (Rate) dated June 28, 2017.
- Lastly, the applicant has sought advance ruling for the issue whether leasing of property for residential subletting would be covered under the exemption for residential dwelling via notification 12/2017 (Rate) dated June 28, 2017.
Ruling of Karnataka AAR:
The coram of Dr.M.P.Ravi Prasad and Mashood Ur Rehman Farooqui ruled that Leasing of property for use as residence along with basic amenities”, in the instant case, is covered under accommodation services, falls under SAC 996311 and hence would qualify as composite supply under Section 2(30) of the CGST/KGST Act, 2017.
Further AAR held that Renting of property by Applicant is not covered under entry 12 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 (exemption for renting of residential dwelling) , as their services are covered under accommodation services falling under SAC 996311.
The Authority held that the exemption under entry 14 of Notification 12/2017-Central Tax (Rate) dated June 28, 2017 in regard to accommodation services is available to the transaction of the applicant.
The AAR observed that leasing of property for residential subletting would not be covered under the exemption for residential dwelling under entry 12 of Notification 12/2017-Central Tax (Rate) dated June 28, 2017, as the two are different and individual transactions.
Also Read: All about reverse charge mechanism (RCM) under GST
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CA. Mohammad Salim is an ICAI award winning Chartered Accountant having rich experience of more than 20 years in the field of indirect taxes. He is the Member, Indirect Taxes Committee of PHD Chamber of Commerce and Industry. He is author of four successful books on GST published by Taxmann Publication and is also GST expert on taxmann portal.
