Blog No. 49: Giving Hostel to students qualifies as residential dwelling used for the purposes of residence – Even lessor can claim exemption when he leases it and lessee sub-lets the unit

HSN

9963

S.No. of CGST Exemption Notification No. 12/2017 CT (Rate)

12

 

The services of leasing of a residential complex to lessee who further sub-lets it to the students or working professionals on a long term basis (3 months to 11 months) is exempt from the levy of GST as it qualifies as “Services by way of renting of residential dwelling for use as residence.”

Read about the case [Taghar Vasudeva Ambrish Vs Appellate AAR, Kar – HC (Kar)] below:

Facts of the Case:

1. The petitioner along with 4 others collectively has let out a residential complex to M/s D Twelve Spaces Private Limited which is engaged in the business of providing affordable residential accommodation to students on a long term basis (starting from 3 to 11 months).
2. M/s D Twelve claims that there would be no GST obligation on services provided by the petitioner.
3. Advance Ruling was filed before AAR which was disposed off against the petitioner inter-alia holding that:

3.1.        What is given is an immovable property consisting of only rooms with attached toilets as per the layout of leased premises annexed to the lease agreement and does not fit into the meaning of a dwelling which means a house.

3.2.        The service not for use as a residence by lessee.

4. Appellate Authority for Advance Ruling also upheld the ruling given by AAR and observed as under:

1. Hostel building is more akin to sociable accommodation rather than what is understood as residential accommodation.

5. Feeling aggrieved with the ruling issued by the AAR-Appeals, the Petitioner filed the writ petition before the Hon’ble Karnataka High Court seeking.

Observations of the Court

6. The burden of proving that the case comes within four corners of exemption notification is on the petitioner.
7. As per revised Master Plan 2015 of Bangalore City, accommodation which is used for students and working women is classified as residential dwelling.
8. The students use the hostel for sleeping, eating and for the purpose of studies for a period ranging between 3 months to 12 months. In the hostels, the duration of stay is more as compared to hotel in guest house, club etc.
9. The notification does not require the lessee itself use the premises as residence. Therefore, the benefit of exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises.
10. The finding recorded by AAAR Karnataka that the hostel accommodation is more akin to ‘sociable accommodation’ is unintelligible and is not relevant. 

Decision

11. The petitioner is held entitled to benefit of exemption notification.