Owners of Buildings can claim GST Exemption if Residential Premises Leased out are used as Hostel to House Students, Working Professionals: Karnataka HC [Read Order]

The Karnataka High Court has held that owners of buildings can claim GST Exemption if residential premises leased out are used as hostels to house students, and working professionals.

The petitioner, Taghar Vasudeva Ambrish is co-owner of a residential property situated in Bengaluru. The property is a residential property having 42 rooms in all spread out between a stilt floor, ground floor and four floors along with terrace and common areas. The petitioner along with other co- owners have executed a lease deed in favour of the lessee namely M/s.D Twelve Spaces Private Limited. The lessee has leased out the residential property as Hostel for providing long term accommodation to students and working professionals with the duration of stay ranging from 3 months to 12 months.

The petitioner with a view to seek clarification with regard to his eligibility to seek exemption on the rent received by him from the lessee by letting the property, filed an Advance Ruling application in prescribed form under Section 97 of the Act before the Authority for Advance Ruling, Karnataka. 

The AAR Karnataka vide Advance Ruling dated 23.03.2020 inter alia held that services viz., renting of residential dwelling for use as a residence do not fall under Entry 13 of the Exemption Notification. It was further held that the lessee itself is not using the accommodation. 

Thus, it was held that the petitioner has to charge Goods and Services Tax while issuing invoice to the lessee provided it is registered under the Act. Accordingly, it was held that the benefit of exemption notification is not available to the petitioner.

The petitioner thereupon filed an appeal under Section 100 of the Act before the Appellate Authority for Advance Ruling, Karnataka. However, the AAAR Karnataka by an order dated 31.08.2020 inter alia held that property rented out by the petitioner is a hostel building which is more akin to sociable accommodation rather than what is commonly understood as residential accommodation. Therefore, the property rented out by the petitioner cannot be termed as residential dwelling. It was further held that 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.

The division bench of Justice Alok Aradhe and Justice M.I.Arun has held 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.

“In view of the preceding analysis, the order dated 31.08.2020 passed by the AAAR Karnataka is quashed and it is 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. The petitioner is entitled to benefit of exemption notification,” the court said.

TAGHAR VASUDEVA AMBRISH vs APPELLATE AUTHORITY FOR ADVANCE RULING KARNATAKA

CITATION: 2022 TAXSCAN (HC) 187

To Read the full text of the Order CLICK HERE

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