The Tamil Nadu Authority of Advance Ruling (AAR) ruled that 18% GST on leasing of pathways to a person to their dwelling unit.
The applicant, Chennai Metro Rail Limited acquired a portion of the property including the land which is now leased out to the owner for public purpose on payment of adequate compensation.
As per clause 4 of the agreement entered into between CMRL and Dr. K. Prema, the lessee, Dr. K. Prema is entitled to use the passage with 3 Meter width and 14 Meter length measuring 452 out of the acquired land for shared access purpose for 35 years and has to pay Rs.30,00,000 towards lease amount.
It appears that the arrangement is made since, the Dr. K. Prema from whom the property is acquired has no pathway to her residential property.
The applicant has stated that according to notification No. 12/2017-Central Tax (Rate), renting of residential dwelling units for use as a residence is exempt from GST.
Hence, grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt.
However, the applicant has sought the authority to clarify whether the amount of Rs.30,00,000 received for the purpose of granting right to access to the pathway leading to the dwelling unit is exempted from levy of GST as per the notification treating the agreement as one for leasing out a “dwelling unit”.
The applicant sought the advance ruling on the issue whether leasing of a pathway to a person to her/his dwelling unit by CMRL is taxable under GST.
The two-member bench of Manasa Gangotri Kata and Kulinjee Selvaan ruled that the act of agreeing to grant easement rights of the pathway by the applicant to Dr.K.Prema by way of shared access as per the MOU dt 21-08-2019 is classifiable under SAC 999794 and taxable under GST at 9% CGST and 9% SGST under Sl No. 35 of Notification 11/ 2017 –Central Tax (Rate) dated June 28, 2017 and Notification No.II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated June 29, 2017 respectively.
“the applicant owns the pathway but has agreed through an MOU with the individual to permit her to use the pathway to access the main road from her residential property which is adjacent to the pathway. As seen above, this is an easement right given by the applicant to the individual to enjoy her residential property for a period of time for a consideration. The applicant has agreed through a MOU to tolerate her use of this pathway for a period of time for consideration. Hence, this service of agreeing to grant easement rights is a service of agreeing to tolerate an act and is classifiable under SAC 999794 under ‘other miscellaneous services’/ ‘Agreeing to tolerate an act’,” the AAR observed.
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