Renting Services To Government Department For Welfare Of Backward Class Is Exempt- AAAR, Maharashtra

The Hon’ble Appellate Authority for Advance Ruling, Maharashtra vide its order dated 1st April 2022 in the matter of M/S. TUKARAM PUNDALIK BORADE in MAH/AAAR/AM-RM/03/2022-23, set aside the order passed by Maharashtra Authority for Advance Ruling (“MAAR”) and held that the renting of immovable property provided to Social Welfare Department for residential accommodation of girls from the backward classes is exempt under Notification No. 12/2017 – C.T. (Rate) dated 28.06.2017.  Further, it was also held that deduction of TDS under Section 51 would not be applicable to the impugned transaction.

The appellant preferred the appeal assailing the order passed in Advance Ruling No. GST-ARA-94/2019- 20/B-84 dated 02.11.2021 passed by “MAAR”, whereby the benefit of exemption under Notification No. 12/2017 – C.T. (Rate) dated 28.06.2017 was denied to the appellant for the services of renting of immovable property provided to Government social welfare department for residential accommodation of girls from the backward classes.  Further, it was held that TDS would be applicable to the transaction as it is not exempt.

Facts:

  • The Appellant is unregistered and engaged in providing the service of renting of immovable property, situated at Nashik, and receiving rental income from the same.
  • The Appellant is one of the Co-owners of the immovable property, which are jointly owned by five individuals and holds a proportionate share in the property as per the terms of three separate agreements entered.
  • The property was let out to Social Welfare Department, Nashik Division of Maharashtra Government and the service being provided for 36 months from 03.06.2019. The Appellant is receiving a fix rent of Rs. 1,62,073/- for the three separate agreements entered for the immovable properties with different co-owners for each agreement (from remaining four individuals).
  • That all five co-owners in total received the rent of Rs. 81,63,852.00, however the share of each of the co-owner does not cross the threshold limit.
  • The Maharashtra Government department is deducting TDS under Section 51 and the Appellant being unregistered under GST is not able to utilize the ITC, resulting in blockage of funds.
  • The Appellant with above background filed an application of Advance ruling before “MAAR” seeking advance ruling on following questions: –
  1. Whether the services provided to Special Assistance Department, Government of Maharashtra (Social Welfare Department) for residential accommodation of underprivileged girls is exempt from GST?
  2. Whether TDS provisions will be applicable in case where the supply of services is exempt?
  3. Whether Section 51 ‘Deduction of TDS’ would be applicable as the Appellant is unregistered under GST and the service has been provided to Government Department.
  4. If the TDS is deducted, whether they would be entitled for refund of the same.

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