QUESTION
A registered dealer owns multi storied hostel building, enter into rent agreement with company for letting out entire building on fixed monthly rent. In turn lessee company let out property to third party for residence purpose and collect fees as per contract. As per one clause of agreement lessor will charge fixed rent on daily basis per room & room can let out only for residence purpose and not any commercial activity. Lessor will get fixed rent irrespective whether lessee company let out property to third party or not. Following is my question regarding above situation, 1. Whether lessor entitled to claim GST exemption, if fixed daily room rent is less than 1,000/-.
ANSWER
Facts of the case:
A
registered dealer owns a multi-storied hostel building, enters into a rent
agreement with company for letting out entire building on fixed monthly rent. In
turn, lessee company let out property to third party for residence purpose and
collect fees as per contract. As per one clause of agreement lessor will charge
fixed rent on daily basis per room & room can be let out only for residence
purpose and not for any commercial activity. Lessor will get fixed rent
irrespective of whether lessee company let out property to third party or not.
Whether lessor entitled to claim GST exemption, if fixed daily room rent is less
than 1,000/-.
Law Applicable:
Notification No. 12/2017- Central Tax (Rate)
|
14 |
Heading 9963 |
Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation below or equal to one thousand rupees per day or equivalent. |
Nil |
Nil |
Interpretation:
As per Exemption Notification No. 12/2017 Central Tax (Rate), Services if given
by hotel, inn, guest house, club or campsite, by whatever name called, for
residential or lodging purposes, having value of supply of a unit of
accommodation below or equal to one thousand rupees per day or equivalent
will attract nil rate but in your case you are transferring the rights to
further use the building for leasing purpose and not for self residence to the
Company.
Therefore the services given to the lessee company for further renting (business
purpose) and not for self residence of lessee will not come under entry no 14 of
Notification No 12/2017 Central Tax (Rate) and hence not exempt.
Conclusion: Lessor will not be entitled for exemption as per Notification
No 12/2017 Central Tax (Rate) as the services given to the lessee company are
for further renting (business purpose) and not for self residence of lessee.(Reply
dt.12.11.2020)