Lease of residential premises as hostel is exempted from GST: HC

 









The High Court of Karnataka has said that leasing of residential premises as hostel for students and working professionals is exempted from payment of Goods and Services Tax (GST).

A Division Bench comprising Justice Alok Aradhe and Justice M.I. Arun passed the order while allowing a petition filed by Taghar Vasudev Ambarish, a resident of Jayanagar in Bengaluru.

The petitioner, along with co-owners, had leased out a residential property, having 42 rooms, to lessee, M/s DTwelve Spaces Private Limited for using as a hostel for providing long-term accommodation to students and working professionals for their stay between three to 12 months period.

The petitioner had moved the Court questioning orders of the authorities for advance ruling set up under the GST Act as they had rejected his plea seeking clarification that he was entitled for exemption from payment of GST in terms of a notification issued on September 28, 2017 with the title ‘services by way of renting of residential dwelling for use as residence.’

The Appellate Authority on Advance Ruling, Karnataka had in August 2020 had said that the “property rented out by the petitioner is a hostel building, which is more akin to ‘sociable accommodation’ rather than that is commonly understood as residential accommodation.”


However, the Court pointed out that the Central Board of Indirect Taxes and Customs in its Education Guide issued in 2012 had clarified that “in normal trade parlance residential dwelling means any residential accommodation and is different from hotel, motel, inn, guest house etc. which is meant for temporary stay.”

As the word ‘residential dwelling’ is not defined in the GST Act, the Court, from the dictionary pointed out that the expression ‘residence’ and ‘dwelling’ have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression ‘residential dwelling’ and it cannot be held that the same does not include hostel, which is used for residential purposes by students or working women.

Noticing that the 2017 notification does not require the lessee itself use the premises as residence, the Court also pointed out that petitioner’s building used as hostel is classified under residential category in the Revised Master Plan 2015 of Bangalore City.

The petitioner is entitled for exemption from GST as firstly, the residential dwelling, rented for being used as hostel, fall within the purview of residential dwelling as the same is used by the students and the working women for the purposes of residence, and secondly, the residential dwelling is being used for the purposes of residence.

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