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Renting entire Villa to One Client, will be considered ‘One Unit’: AAR [Read Order]

By Taxscan Team -

The Maharashtra Authority of Advance Ruling (AAR) ruled that renting an entire villa to one client, will be considered ‘One Unit’ as specified under Chapter, Section, or Heading 9963 under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.

The applicant, M/s ISPRAVA Hospitality Pvt. Ltd. is engaged in the activity of giving Luxurious Villa on rent to its clients in Goa and Tamil Nadu and intending to initiate the said business in Maharashtra.  Each Villa consists of two to six rooms and is offered to clients on a per-day basis for the entire Villa.

The per-day rent of an entire villa will be more than seven thousand five hundred at any given point of time in a year. However, if one may calculate the cost per room per villa then at any given point of time, it would be less than seven t thousand five hundred. Two different clients will not be able to book the same villa for the same day and time and there will be no option of booking particular rooms of the Villa, interested clients need to book the entire villa.

The applicant sought the advance ruling on the issue of what is the meaning of “Per Unit” as specified under Chapter, Section, or Heading 9963 under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.

The Authority consists of Members A.A. Chahure and P.Vinitha Shekhar ruled that renting an entire villa to one client, will be considered ‘One Unit’ as specified under Chapter, Section, or Heading 9963 under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.

“The pattern of renting in relation to the usage of the property provides the context’ or ‘perspective’ in the determination of the unit of accommodation. In a hotel, a room constitutes ‘a unit whereas in a hostel, a bed may constitute a unit, as tariff is also declared accordingly. In the present case, the applicant themselves have mentioned that rent is proposed to be offered to clients on a per-day basis for the entire villa. The two different clients will not be able to book the same villa and there will be no option of booking a particular room of the villa. Interested clients need to book the entire villa. Thus, it is crystal clear that villa per se is an indivisible unit in the applicant’s business parlance and the declared tariff only for the villa as a whole. Hence, the expression “per unit” in the present case will be the entire villa,” the AAR noted.

To Read the full text of the Order CLICK HERE