As per the Supreme Court, no GST is to be charged on leasing out residential premises to an entity that is using it as a hostel for students and working professionals.
The verdict of the Karnataka High Court has been kept by a bench of justices JB Pardiwala and KV Viswanathan, which stated that leasing out of residential premises to an entity which uses it as a hostel to students and working professionals is waived under GST.
“In the case on hand, the ultimate use of the property as residence remains unchanged. However, if 18 per cent GST is levied on this transaction between the respondent No. 1 and the lessee i.e. M/s DTwelve Spaces Private Limited, the same would ultimately be passed on to the students and working professionals which would lead to a situation where the legislative intent behind granting exemption for residential use is defeated,” the bench stated.
The Apex court was hearing an appeal that had been submitted by a co-owner of the residential property that has 42 rooms in Bengaluru. A lease deed in favour of the lessee, namely M/s D Twelve Spaces Private Limited, has been implemented by the applicant along with the other co-owners.
The lessee operated the residential property as a hostel, providing long-term accommodation for students and working professionals with stays of three to twelve months.
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The applicant asked for clarification concerning its eligibility to seek exemption for the renting services provided and filed an application before the Authority of Advance Ruling, Karnataka.
The AAR, Karnataka, said that the renting of residential dwellings for use as residences is not covered under entry 13, and the benefit of exemption from the notification is not available.
Before the Appellate Authority for Advance Ruling, the applicant had submitted a plea which ruled that the property rented out is a hostel and cannot be termed as residential accommodation or residential dwelling and refused the exemption benefit.
The Karnataka High Court ruled that under Goods and Services Tax (GST), there is no charge for leasing out residential premises to an entity that is using it as a ‘hostel’ to students and working professionals.
| Case Title | The State of Karnataka vs. Taghar Vasudeva Ambrish |
| Case No. | NO. 7846 OF 2023 |
| Supreme Court | Read Order |
