Purpose and duration of stay are crucial in definition of “Residential Dwelling”: AAR [Read Order]

The Rajasthan Authority of Advance Ruling (AAR) has ruled that the purpose and duration of stay are crucial aspects in the definition of residential building.

The applicant is engaged in providing Professional service of Chartered Accountant and currently Senior Partner in B D Jain & Co. Chartered Accountants. Applicant is currently unregistered under GST Act 2017. Applicant is owner of the demised premises.

The applicant has entered into lease agreement with a company incorporated in India (Lessee) which expression shall unless repugnant to the context or meaning thereof, mean to include its successors and permitted assigns) which is inter alia engaged in the business of providing comprehensive, independent fund accounting, reporting, and analytics solutions to fund administrators providing administration services to hedge fund industry.

Land use of property is residential. Lease deed issued by Jaipur development Authority(JDA), Jaipur in the respect of the Demised premises in Residential.

As per Lease Agreement the Demised Premises shall be used solely for commercial purposes by the Lessee i.e. for establishing the branch/office of the Lessee. Construction of property is done for use as commercial purposes only.

The assessee/applicant pointed out the following items which could be important while defining “residential drawing”,

“Land use of property by local authorities; or

Layout of the property, its structure, whether it is designed for usage

as a residential unit or a commercial unit; or

The purpose for which the dwelling is put to use; or

How is the plan of the property sanctioned by the local authorities; or

The intention of the developer / owner of the property; or

The length of stay intended by the users; or

Electricity Bill; and

Municipal Tax”

The authority bench of Central Tax Member Umesh Kumar Garg and State Tax Member Mahesh Kumar Gowla noted that, “the definition of Residential dwelling is not mentioned in GST Law.”

It was further observed that, as per Black's Law Dictionary: 'Residential dwelling means living in a certain place permanently or for a considerable length of time', and that,

“As per Merriam Webster dictionary: 'A shelter (as a house) in which people live'” and

“As per the Oxford dictionary: 'A house or apartment or other places of residence or a place to live in or building or other places to live in'.”

It was thus noted that it is to be decided by finding out the use of property rented out by the

Applicant and accordingly the taxability of GST shall be determined.

It was thus ruled that, “The important factors to be included in the definition of Residential Dwelling is the purpose for which the dwelling is put to use and the length of stay intended by the users.”

To Read the full text of the Order CLICK HERE

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