The Madras High Court has ruled that Goods and Services Tax ( GST ) shall not be levied on hostels as it comes under the purview of ‘Residential Dwelling For Use as Residence’ under Entry Nos.12 and 14 of the Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017.
The bench of Justice Krishnan Ramasamy stated that “renting out the hostel rooms to the girl students and working women by the petitioners is exclusively for residential purpose, this Court is of the considered view that the condition prescribed in the Notification in order to claim exemption, viz., ‘residential dwelling for use as residence’ has been fulfilled by the petitioners and thus the said services are covered under Entry Nos.12 and 14 of the Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017, the petitioners are entitled to be exempted from levy of GST.”
The High Court has taken up all the writ petitions and Writ Miscellaneous Petitions (WMP) which have similar facts, circumstances and issues for issuing a common order.
The petitioners, including Thai Mookambikaa Ladies Hostel, hold licences to operate private ladies hostels, providing accommodation and meals to college students and working women on a monthly basis at reasonable rates. They maintained that their operations serve philanthropic motives, aiming to offer a safe environment for female students and workers from distant areas who struggle to find affordable accommodation in the city.
Following the implementation of the GST regime, the Central Government issued exemption notifications specifying certain categories of exempt services. The petitioners argued that their provision of residential accommodation to female students and working women qualifies for GST exemption under these notifications.
Ms. Aparna Nandakumar, representing the petitioners, strongly argued that the hostels operated by them qualify as ‘residential dwelling’ under Entry 12 of Exemption Notification No.12/2017, dated 28.06.2017, exempting them from GST.
Although GST laws do not provide a specific definition for ‘residential dwelling,’ she referred to the Taxation of Services an Education Guide issued by the CBIC, which defined it as “any residential accommodation” excluding places meant for temporary stay. Based on this interpretation, she asserts that the petitioners’ ladies hostels, providing accommodation to female students and working women, are entitled to the exemption, thus not subject to GST.
She further argued that according to Section 2(e) of the Tamil Nadu Hostels and Home for Women and Children (Regulation) Act, 2014, a ‘hostel’ or ‘lodging house’ is defined as a building providing accommodation for women or children, with or without boarding. Additionally, Section 2(14) of the Tamil Nadu Shops & Establishments Act, 1947 defines a ‘residential hotel’ as premises conducting business for providing dwelling accommodation. Therefore, she asserts that hostel accommodation regulated under the Hostel Regulation Act differs from hotel accommodation.
The court emphasised that the burden lies on the petitioners to prove their hostels qualify for the exemption. It stated that “in the said notification for renting of properties by the hotel, motel, inn, guest house, camp site, lodge, house boat, or like places meant for temporary stay has not been exempted”
The Second Respondent, Tamil Nadu Authority for Advance Ruling (TN AAR) mainly compared the hostel premises on par with hotel premises and the intention of the petitioners in renting out the premises in the name of hostels, is nothing but providing hotel accommodation and it does not qualify as residential dwelling for use as residence. However, the Madras High Court set aside the AAR ruling.
The High Court emphasised that GST on hostel accommodation should be considered from the perspective of the service recipient, not the provider. The TR AAR incorrectly treated GST imposition as a burden on the service provider, whereas it’s collected from the recipient and deposited with the government by the provider.
The bench clarified that the imposition of GST on hostel accommodation hinges on whether the occupants use the premises for residential or commercial purposes. Exemption from GST is contingent upon the residential nature of the end-use, rather than the property’s nature or the service provider’s business. Hence, the court emphasised viewing the GST issue from the recipient’s perspective, not the service provider’s.
Consequently, the Madras High Court ruled in favour of the petitioners by exempting the Hostels from GST. Thus, allowed all writ petitions and setting aside the impugned orders without imposing any costs.
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