There will be no GST levied on the leasing of the residential premises as a hostel, students, and working professionals said Karnataka High Court has ruled.
The applicant Taghar Vasudeva Ambrish and the co-owners lead a property with 42 rooms to the company said as 12 spaces Pvt ltd. the property was leased as a hostel to furnish long-term accommodation to the students and the working professionals with the time period of stay ranging from 3 months to 12 months.
Rulings of AAR and AAAR
Along with the query the applicant has proceeded to the Authority for Advance Ruling (AAR) that if the leasing would get the exemption from GST or not. But AAR refused from giving the exemption. After then the applicant has proceeded to Appellate Authority for Advance Ruling (AAAR) where it ruled that the property rented out via the application is a hostel building which is similar to the sociable accommodation instead of what is mutually comprehended as the residential accommodation.
Hence the property rented out through the applicant would be called a residential place and thus no exemption shall be provided.
The Ruling of Karnataka High Court
Post to undergoing via all the facts and the arguments the court mentioned the residential place has been rented as the hostel to the students and the working women come under the residential place as that is used through the students and the working women for the intention of the residence. In another way, the residential place is being utilized for the intention of the residence.
“It is also worth mentioning that the notification does not require the lessee itself use the premises as a residence. Therefore, the benefit of exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises, the court specified.”
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Moreover the same is to be transparent that the services furnished by the applicant that is leasing out residential premises as a hostel to the students as well as the working professionals undergo beneath the Entry 13 of Notification No.9/2017 dated September 28, 2017, such as services through the method of renting of the residential place towards the use as the residence and is thus subjected for the exemption.
Little Advantage to Occupants
Commenting upon the ruling Prateek Bansal Associate Partner (Tax & Customs) at White and Brief, a law firm specified that the current order is often premised on the time of occupying the place for the purpose of testing that the same place is subjected for the residential place or not. But the same needs attention that the High court has not relied on the regulations of finding out the occupancy as temporary or permanent relied on the time of this stay. Hence same is important to find out the facts for every case to claim the GST exemption.
“While the exemption from GST levy qua such residential dwellings cum hostels is a welcome decision for students & professionals across the country, the GST discharged by lessors/owners on availing various inputs and input services (for the upkeep of the said dwellings) would now become tax-cost, thereby with no or minimal reduction of prices to the ultimate occupants, he added.”
