Telangana High Court Directs Fresh Consideration of GST Exemption Claim on Rental Services Under Notification No.12/2017

Background: The petitioner, a proprietorship firm registered under the Central and State Goods and Services Tax Acts, leased its premises to the State Government for use as a Social Welfare College Boys Hostel. The rental agreement, effective from July 2019, included GST at 18%. While GST was initially paid by the government for six months, payments were discontinued during the COVID-19 pandemic. The petitioner continued to remit GST at its own expense and subsequently sought reimbursement and clarification regarding the liability to pay GST on the rental amount.

The petitioner approached the Authority for Advance Ruling (AAR) under Section 97(1) of the GST Act, seeking exemption under Notification No.12/2017 – Central Tax (Rate), dated 28.06.2017. The AAR held that the services provided by the petitioner did not qualify for exemption, as there was no direct or immediate nexus with the functions entrusted to a municipality under the Twelfth Schedule read with Article 243W of the Constitution. The appellate authority upheld this decision. The petitioner challenged the appellate order before the High Court, which remanded the matter for reconsideration. Upon reconsideration, the appellate authority reaffirmed its earlier view, leading the petitioner to seek a writ of mandamus for reimbursement of GST.

Court’s Reasoning: The High Court, after hearing both parties, observed that the representations made by the petitioner for exemption under Notification No.12/2017 were cryptic and lacked necessary details and supporting documents. The Court found that the petitioner’s claim had not been adequately substantiated in the representations submitted to the authorities.

Order and Legal Principle: The Court disposed of the writ petition, granting liberty to the petitioner to file a fresh, detailed representation before the competent authority (respondent No.1), including all relevant facts and supporting documents. The Court directed that upon receipt of such a representation, the authority should consider the claim in accordance with law within a reasonable period, preferably within twelve weeks. The Court expressly refrained from making any comment on the merits of the petitioner’s claim for GST exemption.

Conclusion: The Telangana High Court’s order emphasizes the necessity for claimants to provide comprehensive and well-documented representations when seeking statutory exemptions. The decision clarifies that authorities are required to consider such claims on their merits, provided they are properly substantiated, and underscores the procedural fairness owed to parties seeking relief under tax exemption notifications.