The Telangana AAR, in the case of In Re. Navya Nuchu [TSAAR Order No. 05/2024 dated February 09, 2024], held that the act of renting the property to the Schedule Caste Development Department, Government Welfare Departmental Hostels and Government Social Welfare College Boys Hostel (“Government SWCBH”) are not qualified for exemption under Notification No. 12/2017-Central Tax (Rate), dated June 28, 2017 (“the Exemption Notification”) because there is no direct relation between the services provided by the Applicant and the functions discharged by the Government SWCBH under Article 243W read with Schedule 12 to the Constitution of India. Therefore, these services do not qualify for exemption under the Exemption Notification.
Facts:
Navya Nuchu (“the Applicant”) entered into an agreement with the Scheduled Castes Development Department, Hyderabad District, Government Welfare Departmental Hostels and Government SWCBH to rent out the property to run SWCBH. The Caste Development Department was providing hostel facilities to the students of Scheduled Caste weaker sections and backward classes.
Hence, the Applicant filed an Application for Advance Ruling in FORM ARA-01 under Section 97(1) of the Telangana Goods and Services Tax Act, 2017 (“the TNGST Act”) read with Rule 104 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) and the Telangana Goods and Services Tax Rules, 2017 (“the TGST Rules”) on whether rent received from the Government SWCBH is taxable.
Issue:
Whether rent received from the Government SWCBH is taxable?
Held:
The Telangana, AAR in TSAAR Order No. 05/2024 held as under:
- Observed that, the pure services provided by the Applicant are mentioned in the listed items of Schedule 12 of the Constitution of India which are exempt under the Exemption Notification.
- Relied on, the Hon’ble Supreme Court of India in the case of Doypack Systems Pvt. Ltd. v. Union of India and Ors. (AIR 1988 SC 782) clarified the meaning of the expression ‘in relation to’ as the term ‘relate’ is also defined as meaning to ring into association or connection with. It has been clearly mentioned that ‘relating to’ has been held to be synonymous to ‘concerning with’ and ‘pertaining to’.
- Relied on, the Hon’ble Supreme Court of India in the case of Madhav Rao Jivaji Rao Scindia v. Union of India (AIR 1971 SC 530) observed that the expression ‘relating to’ means to bring into relation or establish a relation. It was further clarified that there should be a direct and immediate link with a covenant and that there cannot be any independent existence outside such a covenant.
- Held that, under Serial no. 3 of the Exemption Notification, pure services provided ‘in relation to any function’ entrusted to a municipality under Article 243W of the Constitution of India are eligible for exemption from GST. The exemption should be directly related to the functions enumerated under Article 243W of the Constitution of India i.e., those functions listed under the 12th Schedule of the Constitution of India. Schedule 11 of the Constitution contains “Education including primary and secondary schools” at Serial no. 17. However, Schedule 12 of the Constitution does not contain such specific entries. Therefore, the Applicant was not eligible for this exemption.
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