Exemption of GST and TDS on Renting of Immovable Property for Social Justice

Exemption of GST and TDS

In the latest case, it is being discussed whether the renting of immovable property to the social justice department is exempted from GST and TDS or not?

Introduction

In the present scenario the appellant Shital Tukaram, a resident of Maharashtra is an unregistered person under the GST regime portal. She provides the services and is involved in the business of renting or letting out accommodation and immovable properties in Nashik, Maharashtra. She is in receipt of the rental income deduced from the letting out of these immovable properties.

The property in this present case was let out to the Social Welfare Department which is a Social Justice and Special Assistance Department of the Government of Maharashtra located in the Nashik Division. It was let out for the purpose of providing residential accommodation and shelter for underprivileged Scheduled Castes and Scheduled Tribes girls of Maharashtra.

Issues Raised

Since the appellant is an unregistered GST user, now the question arises whether the renting out of immovable property for social justice and services is exempted under GST? Another question arises since the services are provided for social justice, then whether the TDS notification issued under Section 51 of the CGST Act 2017 would be applicable for the deduction of TDS in the present scenario or not? These two questions remain unclear and will be answered shortly.

Before going ahead, let’s have a glimpse of what Section 51 of the CGST Act 2017 talks about.

It talks about how certain governmental institutions such as a department under central or state government, a local authority, governmental agencies or such persons notified by the government are mandatorily required to pay TDS i.e tax deducted at direct source at the rate of one per cent. However, it is essential to keep in mind that the tax will only be deduced if the total value of supply under a contract exceeds two lakh and fifty thousand rupees.

In the present case, the appellant sought out the advanced ruling of the court that since she is an unregistered GST person, no GST and TDS will be applied as stated under Section 51 of the CGST Act, 2017 for renting out an immovable property for social services. But the Authority of Advanced Ruling reversed this and stated that GST and TDS are applicable for renting out social services.

Aggrieved by the decision of the AAR (Authority of Advanced Ruling) order, the appellant has filed an appeal on the grounds that in the present case GST and TDS will not be applicable for renting out an immovable property for social services.

The appellant also humbly submitted that the Law Committee, GST Council in the Statement of Operating Procedure dated 2018 has clarified that no TDS is required to be deducted in the case of the unregistered user. Hence no TDS will be deduced.

Court’s Ruling on this Matter

The appeal is decided in the favour of the appellant and the Maharashtra Appellate Authority of Advance Ruling has ruled that the renting of immovable property to the social justice department is exempt from GST and TDS. 

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