The Appellate Authority of Advance Ruling (AAAR), Karnataka, while upholding the ruling of the Authority of Advance Ruling (AAR) ruled that Goods and Service Tax (GST) is applicable on additional facilities provided with accommodation services.
The Appellant, M/s DMS Hospitality Private Limited is a company engaged in providing accommodation services and Rental or leasing services involving own or leased residential property.
The Appellant has entered into an agreement with Dr Banraji B.H for getting the building having two floors on a monthly rent of 2,35,000/- per month for a period of 3 years to be exclusively used for accommodation purposes.
The Appellant company has entered into an agreement with Sodexo Food Solutions India Private Limited for sub-letting 31 rooms at 1st and 2nd floor of the building on a monthly rent of Rs.5,25,000/-per month for residential accommodation of the staff and executives of Sodexo Food Solutions India Private Limited and also providing the following facilities as per the requirement of Sodexo Food Solutions namely washrooms and toilets are common infrastructure required in the building, bunkers with lockers, partitions, water purifier with RO, Dining tables and chairs, Security service for 24 hours, Maintenance work, television set with DTH connection, Water sump, and OHT (2,000 Litres*3).
The applicant contended that GST is applicable only to premises used for accommodation services by Inns, guest house, lodging houses and exemption is provided in the case of renting of residential dwelling for use as residence, hence as per Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 as “Services by way of renting of residential dwelling for use as residence” is exempt from GST.
They submitted that the term ‘dwelling’ is not defined in the GST law or notification. However, based on definitions under various dictionaries, the term ‘dwelling’ means a house, flat or other places of residence.
The lower Authority found that additional facilities amount to the supply of goods as per entry no. 1(c) of Schedule II to the Central Goods and Services Tax Act which reads “any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of the full consideration as agreed, is a supply of goods”.
While upholding the AAR’s order, the Appellate Authority held that it is liable to tax at the rate applicable to each of the goods at the time the delivery of the goods is given to Sodexo Food Solutions India Pvt. Ltd. So also, the security services provided by the Appellant is liable to tax as applicable under SAC 998529 at 18% (9% CGST + 9% KGST) under entry 23(ii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017.
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