The Authority for Advance Ruling (AAR), Karnataka, in the case of M/s. Deeksha Sanjay, Proprietix, vide Order No. KAR ADRG 34/2023 dated 16.11.2023, has held that renting of residential dwelling to the students and working women for residential purpose along with amenities and facilities such as food, furniture, appliance, cleaning, security, pest control etc., on monthly rental basis would be taxable under GST and not be exempted under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
In this case , the applicant engaged in the business of renting of residential dwellings, sought a ruling on whether the renting of residential dwellings along with amenities would be exempt under Entry No 12 of Notification No.12/2017, dated June 28, 2017. If not exempt what would be the applicable goods and services tax (GST) rate and lastly whether input tax credit can be claimed in respect of inputs used for providing the taxable services.
This proprietary concern provided residential accommodation to students and working women on a single, double or triple occupancy per room on a monthly rental basis. The rooms with attached bathrooms contained a cot with mattress, table with chair and cupboard with locking facility, one light and one fan. In addition, breakfast, lunch, dinner and evening tea with snacks were available. Amenities such as laundry, power backup, housekeeping, security and drinking water were available.
The AAR observed that all the above terms and conditions of the agreement reveal that the impugned accommodation being provided by the applicant are akin to provision of a unit of accommodation in a paid guest house or a hostel and does not qualify to be a residential dwelling. Also, the facilities such as food, furniture, appliances, cleaning, security, pest control etc being provided by the applicant to the resident are not optional and the resident cannot choose the service provider. These facilities are mandatorily provided by the applicant and included in the monthly charges. Also, the essentials like electricity and water are not charged based on usage, but a fixed amount is charged. Thus, the services provided by the applicant are unit accommodation for residence and not renting of residential dwelling. These services would be subject to GST at 12%, however input tax credit would be available.
It should be noted that advance rulings are binding on the applicant and the tax authorities in respect of the transaction for which the ruling was sought. However, they do have a persuasive value in assessment of similar cases.
