GST payable on renting of property to Govt for under-privileged girls

Last updated: 17 November 2021

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The Maharashtra Authority for Advance Ruling (AAR) has ruled that renting property to the Government of Maharashtra for housing underprivileged girls is not exempt from GST. The applicant argued that the service was pure and provided to a government department for functions related to Panchayats or Municipalities. However, the AAR found that the applicant failed to demonstrate how providing residential accommodation fell under these constitutional functions, thus making the service taxable.

Court :
Maharashtra Authority for Advance Ruling (MAAR)

Brief :
The Hon'ble Maharashtra Authority for Advance Ruling ("MAAR") held that though the Applicant is supplying pure services but has failed to satisfy that how her activities of providing residential accommodation to underprivileged girls is covered under Article 243G/243W of the Constitution.

Citation :
[GST-ARA-96/2019-20/B-86 dated November 2, 2021]

The AAR, Maharashtra in the matter of M/s Meerabai Tukaram Borade [GST-ARA-96/2019-20/B-86 dated November 2, 2021] held that, services provided by M/s Meerabai Tukaram Borade("the Applicant") to Samaj Kalyan Department ("SKD"), Government of Maharashtra ("GOM"), for residential accommodation of underprivileged girls is not exempt as per the provisions of Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017("Service Exemption Notification"):

SI No.	Chapter	Description of Services	Rate	Condition
3	Chapter 99	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.	Ni	Nil

The Applicant submitted that the supply is undertaken by her to SKD is exempt supply as per the above mentioned provision because it is supply of a pure services made to the department of GOM in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or Municipality under Article 243W of the Constitution.

The Hon'ble Maharashtra Authority for Advance Ruling ("MAAR") held that though the Applicant is supplying pure services but has failed to satisfy that how her activities of providing residential accommodation to underprivileged girls is covered under Article 243G/243W of the Constitution.

Further held, that it is not possible to find whether the said services are supplied by the Applicant by way of an activity in relation to any function entrusted to a Panchayat under Article 243G/243W of the Constitution.

Held that, renting of immovable property services by the Applicant to GOM for under-privileged girl is not liable for exemption as per Service Exemption Notification.

Further, held that as the supply of service by the Applicant is not exempt supply, thus the TDS provision as per Section 51 of Central Goods and Services Tax Act, 2017 will also be applicable.

FAQ :

No, the Maharashtra AAR has ruled that renting immovable property to the Government of Maharashtra for providing residential accommodation to underprivileged girls is not exempt from GST.

The applicant argued that the service provided was a pure service to a government department and related to functions entrusted to Panchayats or Municipalities under the Constitution, thus qualifying for exemption under Notification No. 12/2017-Central Tax (Rate).

The AAR rejected the claim because the applicant could not satisfactorily demonstrate how providing residential accommodation to underprivileged girls constituted an activity related to functions entrusted to Panchayats or Municipalities under Articles 243G or 243W of the Constitution.

Yes, as the supply of service is not exempt, the provisions for TDS under Section 51 of the Central Goods and Services Tax Act, 2017, are applicable.