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Let-out of building to Backward Classes Welfare Department to run post-metric girl's hostel is exempted from GST under Notification No. 12/2017 - Central Tax (Rate): AAR

Applicant

The applicant is letting out his building to the Department of Backward Classes Welfare, Government of Karnataka. The Backward Classes Welfare Department is providing hostel facility to the students of backward classes studying in Government/ Government aided institutions after matriculation.

The applicant has sought advance ruling in respect of the following question:-

i. Whether Rent received from Backward Classes Welfare Department, is taxable or not?

The applicant is of the opinion that since he is letting out his property to Backward Classes Welfare Department who in turn is using it for welfare of weaker section of the society of the backward classes students where the annual income of the family is less than threshold for the creamy layer, therefore the service provided by him to Backward Classes Welfare Department to run post metric Girl's Hostel is exempted service as it is covered under Article 243G of the Constitution.

For ease of reference, relevant portion is re-produced as under:

SI. No.

Chapter, Section, Heading, Group or Service Code (Tariff)

Description of Services

Rate (percent.)

Condition

(1)

(2)

(3)

(4)

(5)

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.

Nil

Nil

Held

The applicant has rented his property to the Backward Classes Welfare Department, Government of Karnataka, who in turn is using the same for providing hostel facilities to the post metric girls of backward classes. This is in relation to the function entrusted to a panchayat under article 243G of the constitution which is covered by 27th entry of 11th schedule which says Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes.

Since the applicant is providing to the State Government pure services by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution, the same is covered under the entry number 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28-06-2017 and hence is exempted under the CGST Act, 2017. For the same reasons, the activity is also exempted under the KGST Act, 2017.

13. In view of the foregoing, we rule as follows:

RULING

The said transaction carried out by the applicant providing pure service in terms of renting of building to Backward Classes Welfare Department, Government of Karnataka for the purpose of an activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution and consequently is exempted from payment of taxes as per entry number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017.



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Published by

TaxReply

on Apr 22, 2021

Comments


It is not post metric, it should be post matric.
By: Arindam Sarkar | Dt: Apr 22, 2021


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