No GST On Commercial Buildings Leased Out As Hostels: HC Karnataka
In a recent judgment, Karnataka High Court (HC) has ruled that – Leasing of residential premises as hostels to students and working professionals will not attract any Goods & Services Tax (GST).
Facts of the case
The petitioner Taghar Vasudeva Ambrish and co-owners leased a property with 42 rooms to a company called Twelve Spaces Private Limited. The property was leased out as a hostel for providing long-term accommodation to students and working professionals, with the duration of stay ranging from 3 months to 12 months.
Previous AAR, AAAR rulings
The petitioner first moved to Authority for Advance Ruling (AAR) with a query regarding whether leasing will get an exemption from GST or not. AAR ruled out the scope of exemption. Then the petitioner moved to Appellate Authority for Advance Ruling or ‘AAAR,’ which held that property rented out by the petitioner is a hostel building that is more like a sociable accommodation rather than what is commonly understood as residential accommodation. Therefore, the property rented out by the petitioner cannot be termed as a residential dwelling and hence has no exemption. Aggrieved over the ruling, the petitioner moved to the High Court.
Latest Karnataka High court ruling
After going through all the facts and arguments of the case, the HC further made the following observations – “Firstly, the residential dwelling is being rented, as the hostel to the students and working women fall within the purview of residential dwelling as the same is used by the students as well as the working women for the purposes of residence. Second, the residential dwelling is being used for the purposes of residence. Thus, the questions mentioned above are required to be answered in favor of the petitioner. It is also worth mentioning that the notification does not require the lessee itself to use the premises as a residence. Therefore, the benefit of GST exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises.”
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