Building Rent Received from Department Of Social Welfare for running Boys Hostel Exempted from GST: AAR [Read Order]

The Karnataka Authority for Advance Rulings ( KAAR ) observed the rent received from renting out building to the Department of Social Welfare for running boys hostel for weaker section is exempted from the GST ( Goods and Services Tax ).

The applicant, K.A. Sujith Chandan, leased a building to the Department of Social Welfare, Government of Karnataka, which the department utilized as a boys’ hostel for Scheduled Tribes. The applicant contended that the services provided to the department are exempt from taxation under Article 243W of the Constitution as per entry No.3 Notification 12/2017 Central Tax ( Rate ).

The aforementioned Entry reads as :

 “ Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”

The Authority contended that the applicant has satisfied the two conditions to claim exemption on supply of services. First the services provided to the State Government are pure services in nature as per the notification. The Applicant had rented out the building to the Scheduled Tribe of Welfare Department for running the department’s hostel. 

Furthermore, the function assigned to the panchayat under Article 243G of the Constitution,  as specified in the 27th entry of the 11th Schedule, pertains to the welfare of weaker sections, particularly Scheduled Castes and Scheduled Tribes and this satisfies the second condition.

The AAR Authority consisting of M P Ravi Prasad ( SGST Member ) and Kiran Reddy T( CGST Member ) considered the submissions and stated that the applicant is providing pure services to the state government related to functions under Article 243G of the Constitution. This falls under Entry No. 3 of Notification 12/2017 Central Tax ( Rate ) dated June 28, 2017, and is therefore not subject to GST.

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