A division bench of the Karnataka High Court has overruled an order of the Appellate Authority for Advance Ruling (AAAR) and held that the activity of leasing out residential premises as hostel would be eligible for GST exemption.
The petitioner, M/s Taghar Vasudeva Ambrish approached the High Court against the AAAR ruling holding that the benefit of exemption notification is available only if the residential dwelling is used as a residence by the person who has taken the same on rent / lease. In the result, the appeal preferred by the petitioner was dismissed.
Justice Alok Aradhe and Justice M.I. Arun held that “the twin questions which need to be answered in order to ascertain whether the service provided by the petitioner is covered under exemption notification are: (i) What is being rented? (ii) The purpose for which the residence is used for. Firstly, the residential dwelling is being rented, as the hostel to the students and working women fall within the purview of residential dwelling as the same is used by the students as well as the working women for the purposes of residence. Secondly, the residential dwelling is being used for the purposes of residence.”
Ruling in favour of the assessee, the High Court held that “Thus, the aforesaid questions are required to answered in favour of the petitioner. It is also worth mentioning that the notification does not require the lessee itself use the premises as residence. Therefore, the benefit of exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises. Similarly, the finding recorded by AAAR Karnataka that the hostel accommodation is more akin to ‘sociable accommodation’ is unintelligible and is not relevant for the purposes of determining the eligibility of the petitioner to claim the benefit under the exemption notification.”
“So far as the submission that the petitioner is registered as commercial establishment under the Karnataka Shops and Commercial Establishment Act, 1961 or that a trade licence has been issued by BBMP, suffice it to say that it is wholly irrelevant for the purposes of determining the eligibility of the petitioner under the exemption notification,” the High Court added.
Concluding the order, the High Court quashed the order of AAAR Karnataka and held that the service provided by the petitioner i.e., leasing out residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely ‘Services by way of renting of residential dwelling for use as residence’ issued under the Act.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
