Lakshmi Tulasi Quality Fuels, In re –  117 942 (AAR – ANDHRA PRADESH)
The short overview of the case is as under :
– The applicant has given its building on lease to a company which is engaged managing and operating the day to day affairs of residential premises and sub-lease of such residential premises to individuals (including students) for the purpose of long stay accommodation.
– The applicant has sought an advance ruling to determine eligibility for exemption from GST on the monthly rentals received on lease of residential building.
– The applicant submitted that the services by way of renting of residential dwelling for use as residence are exempted from GST and the same exemption applies to the services provided by it.
– The Authority for Advance Rulings (‘AAR’) observed that as per the lease agreement the lessee shall pay all operational costs to the lessor mentioned on the bill issued by the relevant authorities.
– The lessee shall also have the right to engage with third-party service providers for food catering, hospitality, security, cleanliness, transportation etc.
– The ‘Residents Enrolment Form’ collected information from residents like Food preference, Optional Service Price etc. Further, rooms in the building are provided with all amenities by lessor such as exhaust fans, geysers, lights and fittings, sanitary fittings, etc.
– Thus, it appears that the building given on lease is a non-residential property.
– Taking into consideration, number of rooms and amenities provided in it, boarding and hospitality services extended to the inmates, it seems that the building was constructed for the purpose of running a lodge house.
– Hence, it is clear that the lessee is engaged in commercial activity of renting of rooms in the dwelling and providing boarding and hospitality services to the inmates.
– Therefore, the applicant has rented out dwelling for commercial activity and not for use as residence, and hence, not eligible for GST exemption.
– In fact, such services are classifiable as ‘Rental or leasing services involving own or leased non-residential property’ under tariff item 997212, attracting 18% GST.