The Maharashtra Authority of Advance Ruling (AAR) in its recent ruling given on application filed by M/s ISPRAVA Hospitality Pvt. Ltd has ruled that renting an entire villa to one client, will be considered ‘One Unit’ as specified under Chapter, Section, or Heading 9963 (Accommodation, food & beverage services) under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.
It is important to note here that as per above Notification where the per unit per day tariff is more than Rs 1000/- but upto Rs 7500/- is 6% (i.e. gross 12% including equivalent SGST). However where such tariff exceeds Rs 7500/- per unit per day the gross GST rate of 18% becomes applicable. Thus rate per unit of hotel accommodation plays vital role in determining that rate of GST applicable. The interesting part is that the expression ‘per unit’ has not been defined under the GST Law which paved way for the instant advance ruling.
Facts of the Case
The applicant, M/s ISPRAVA Hospitality Pvt. Ltd. is engaged in the activity of giving Luxurious Villa on rent to its clients in Goa and Tamil Nadu and intending to initiate the said business in Maharashtra. Each Villa consists of two to six rooms and is offered to clients on a per-day basis for the entire Villa.
The per-day rent of an entire villa will be more than seven thousand five hundred at any given point of time in a year. However, if one may calculate the cost per room per villa then at any given point of time, it would be less than seven thousand five hundred.
Two different clients will not be able to book the same villa for the same day and time and there will be no option of booking particular rooms of the Villa, interested clients need to book the entire villa.
Question on which ruling was sought
The applicant sought the advance ruling on the issue of what is the meaning of “Per Unit” as specified under Chapter, Section, or Heading 9963 under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.
Order of Maharashtra AAR: Highlights and Ruling
- The applicant has no intention to rent out the rooms inside the Villa, individually and therefore there is no question of the individual rooms being treated as ‘per unit’ as per above Notification.
- The pattern of renting in relation to the usage of the property provides the context’ or ‘perspective’ in the determination of the unit of accommodation. In a hotel, a room constitutes ‘a unit whereas in a hostel, a bed may constitute a unit, as tariff is also declared accordingly. In the present case, the applicant themselves have mentioned that rent is proposed to be offered to clients on a per-day basis for the entire villa.
- The two different clients will not be able to book the same villa and there will be no option of booking a particular room of the villa. Interested clients need to book the entire villa. Thus, it is crystal clear that villa per se is an indivisible unit in the applicant’s business parlance and the declared tariff only for the villa as a whole. Hence, the expression “per unit” in the present case will be the entire villa.
In view of above deliberations, the Authority consisting of Members A.A. Chahure and P.Vinitha Shekhar ruled that renting an entire villa to one client, will be considered ‘One Unit’ as specified under Chapter, Section, or Heading 9963 under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.
The above ruling implies that rate of GST @ 18% will be applicable where the per day tariff of renting of entire villa exceeds Rs 7500/- per day. Needless to mention here that in case each room was regarded as ‘per unit’, GST rate of 12% would have come into play where tariff of each of rooms in the villa was upto Rs 7500 per day.
The order of Maharashtra AAR can be read below:
For future reading and reference the order can also be downloaded from below:
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