News: No GST on leasing residential building as hostel: Karnataka HC-21-02-2022
The lessee leased out the six-floor property with 42 rooms as hostel for providing long-term accommodation to students and working professionals with the duration of stay ranging from 3 months to 12 months.
BENGALURU: : Leasing out residential premises as a hostel to students and working professionals is exempted from the Goods and Services Tax (GST), the Karnataka high court has said. In a recent judgment, the court said leasing out residential premises as a hostel is "covered under entry 13 of exemption notification dated September 28, 2017 issued under the Integrated Goods and Services Tax (IGST) Act, 2017". Taghar Venkatadri Ambarish, the petitioner and co-owner along with other co-owners, had executed a lease deed in favour of D Twelve Spaces (the lessee) on June 21, 2019. The lessee leased out the six-floor property with 42 rooms 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 had challenged the August 31, 2020 order of Appellate Authority for Advance Ruling, Karnataka (AAAR Karnataka), holding that property is a hostel building was more like sociable accommodation rather than residential.
Further, AAAR Karnataka had held the rented property cannot be termed ‘a residential dwelling' and 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, reiterating an earlier finding given by the Authority for Advance Ruling, Karnataka on March 23, 2020. However, the high court's division bench headed by Justice Alok Aradhe, allowing the petition filed by Ambarish, observed: "Firstly, the residential dwelling is being rented as the hostel to the students and working women falls within the purview of residential dwelling as the same is used by the students and working women for the purposes of residence. Secondly, the residential dwelling is being used for the purposes of residence. Thus, the aforesaid questions are answered in favour of the petitioner." It is worth mentioning, the bench added, that the notification does not require the lessee to use the premises as residence. Therefore, the benefit of exemption notification cannot be denied to the petitioner on grounds that the lessee is not using the premises. The petitioner had claimed that the accommodation is classified under residential category in the Revised Master Plan 2015 of Bengaluru city, and added that the exemption notification does not require that the lessee should use the premises as residence
