Tamil Nadu AAR in the case of Chennai Metro Rail Limited

Case Covered:

Chennai Metro Rail Limited

Facts of the Case:

CHENNAI METRO RAIL LIMITED, PH road, Koyambedu, Chennai600107, (hereinafter called the ‘Applicant’ or ‘CMRL1 is registered under the GST Vide GSTIN 33AADCC233KlZ0. They have sought Advance Ruling on the following question:

Whether leasing of a pathway to a person to her/his dwelling unit by CMRL is taxable under GST?

The Applicant has submitted a copy of the application in Form GST ARA – 01 and also submitted a copy of the Challan evidencing payment of application fees of Rs. 5,000 /- each under sub-rule ( 1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.

The applicant has stated that they had acquired a portion of the property (including the land which is now leased out to the owner) for public purposes from Dr.K.Prema, D/o Shri Late T.Kanagasabapathi residing at Plot No.2045 E, 2″ Avenue, Anna Nagar, Chennai- 600040 in Thirumangalam, Anna Nagar on payment of adequate compensation. As per clause 4 of the agreement entered into between CMRL and Dr. K. Prema on 21-08-2019, Dr. K. Prema(lessee) is entitled to use the passage with 3 Meter width and 14 Meter length measuring 452 out of the acquired land for shared access purpose for 35 years and has to pay Rs.30,00,000/- towards lease amount. It appeared that the arrangement is made since Dr. K. Prema from whom the property is acquired has no pathway to her residential property. The applicant has stated that according to notification No. 12/2017-Central Tax (Rate), renting of the residential dwelling unit for use as a residence is exempt from GST. Hence, the grant of tenancy rights in a residential dwelling for use as a residence dwelling against tenancy premium or periodic rent or both is exempt. However, the applicant has sought the authority to clarify whether the amount of Rs.30,00,000/- received for the purpose of granting the right to access to the pathway leading to the dwelling unit is exempted from levy of GST as per the above-mentioned notification treating the agreement as one for leasing out a “dwelling unit”. The applicant has also stated that apparently, it may lead to an inference that the only land has been leased out and not a “dwelling unit” and hence, the lease amount cannot be exempted from levy of GST. Whereas, a reading of the Indian Easement Act, 1891 would establish that the land over which the lessee acquired the Easement right would form part of the “dwelling unit” owned by the lessee. They have stated that without the Easement right over the property belonging to CMRL, there would be no access to the house owned by the lessee and in such a scenario nobody can live in that house, and therefore it cannot acquire the character of a “dwelling unit”. However, once the lessee or anybody gets a right over the land belonging to CMRL to have access to the house, the house acquires the character of “dwelling unit” and therefore, necessarily the definition or meaning of “dwelling unit” would include the land over which the lessee gets the “Easement right”.

Observations:

We have carefully examined the submissions of the applicant in their application, their oral and written submission during the personal hearing, their further submissions after PH, and the comments of the central jurisdictional officer in the instant case. The question on which advance ruling is requested is as follows:

Whether leasing of the pathway to a person to her /his dwelling unit by CMRL is taxable under GST?

The applicant claims that this land for which the access is shared against a consideration is to be considered as leased for residential dwelling as the pathway provides the existing residential property of Dr. K. Prema, access to the Road. It is their claim that the shared access extended for consideration, is an Easement right extended, should be considered as land appurtenant to the residential dwelling and they are eligible to the exemption at SI.No. 12 of Notification No. 12/2017- C.T.(Rate) which exempts the ‘services by way of renting of residential dwelling for use as a residence’ classified under SAC 9963 or 9972. The applicant has stated that the extension of lease of shared access is in the course of business and therefore it is a supply under GST. They also agree to receipt of consideration for such supply. The issue before us is whether such supply is eligible for an exemption to vide Notification No. 12/2017-C.T.(Rate) or taxable.

Ruling:

The act of agreeing to grant easement rights of the pathway by the applicant to Dr.K.Prema by way of shared access as per the MOU dt 21-08-2019 is classifiable under SAC 999794 and taxable under GST at 9 % CGST and 9% SGST under SL No 35 of Notification 11/2017 -Central Tax(Rate) dt 28.06.2017 and Notification No.II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 respectively.

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