Facts: The petitioner is one of the 13 co-owners of a jointly owned immovable property, which is rented-out to different parties. Co-ownership of the property is for financial, administrative and family reasons. In such cases, a property may be divided by metes and bounds or there can be proportionate ownership of each owner. Total rent from all these properties exceed twenty lakh rupees in a financial year. However, individual share of any co-owner does not exceeding the threshold limit. The owners are planning to engage one of the co-owners to collect rent and distribute among themselves for the purpose of administrative convenience through execution of a power of attorney.
Issues Involved:
The petitioner is before the Kerala Authority for Advance Ruling (“the AAR”) for getting ruling in respect to following:
- Whether small business exemption under Section 22 of the GST Act is available to all owners separately in case of jointly owned property.
- Engaging a co-owner to collect and distribute rent among all the owners for administrative convenience will have any implication on the business exemption under Section 22 of the GST Act for individual co-owners.
Held: The Hon’ble AAR of Kerala vide ADVANCE RULING No. KER/ 12/2018 dated September 19, 2018 pursued the appellant plea in detail and observed that, under GST scenario ‘renting of immovable property’ is defined as supply of service attracting 18% GST. But, as per Section 22 of the GST Act, a supplier is exempted from registration, if his aggregate turnover is not exceeding Rs. 20 Lakhs in a financial year. As per the provisions of the Income Tax Act, 1961, in the case of jointly owned properties, each joint owner is assessed separately for his share and he is also eligible for any relief as an individual owner of his respective share. There is also a judicial pronouncement under Service Tax that clubbing of rent amount received by each co-owner, as per their share in jointly owned rented property, is not permissible.
In view of supra observation, the following rulings were issued:
- Small business exemption, provided under Section 22 of the GST Act, is eligible to the co-owners separately in the case of jointly owned property, where the rent is collected together, but divided equally and transferred to the respective co-owner.
- Engaging a co-owner to collect and distribute rent among all the owners for administrative convenience has no implication on the business exemption under Section 22 of the GST Act for individual co-owners.
Citation: [2018] 98 taxmann.com 159 (AAR – KERALA)