Many Authorities for Advance Ruling have held in past that Exemption available to Residential Dwellings is not available to the Hostels as they do not fall in the scope of Residential Dwellings. (One such Advance Ruling is referred).
However, now Hon'ble Karnataka HC in the case of Taghar Vasudeva Ambrish Vs AAAR has held that Hostel Rent is not subject to GST (Copy of Judgement is placed at the ends of the article).
From this Judgement one another thing has been clarified that in case of Advance Rulings also Taxpayer can opt for writ Jurisdiction of the the Hon'ble High Courts.
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Reasoning Provided by the HC (As per our Interpretation)
As word " Residential Dwelling" is not defined in the law, it is well settled rule of Statutory Interpretation of fiscal statues that the words used therein if not defined in the statute have to be interpreted in their popular sense.
The popular sense means the sense in which people conversant with the subject matter with which the statute is dealing, would attribute it.
It is provided in CBIC education guide during S.Tax Regime that in normal trade parlance residential dwelling means any residential accommodation and is different from hotel, motel, inn, guest house etc. which is meant for temporary stay.
Thus, it evident that the expression 'residence' and 'dwelling' have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression 'residential dwelling' and it cannot be held that the same does not include hostel which used for residential purposes by students or working women.
The twin questions which need to be answered in order to ascertain whether the service provided by the petitioner is covered under exemption notification are:
(i) What is being rented?
(ii) The purpose for which the residence is used for.
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.
Secondly, the residential dwelling is being used for the purposes of residence. Thus, the aforesaid questions are required to answered in favour of the petitioner. It is also worth mentioning that 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. Similarly, the finding recorded by AAAR Karnataka that the hostel accommodation is more akin to 'sociable accommodation' is unintelligible and is not relevant for the purposes of determining the eligibility of the petitioner to claim the benefit under the exemption notification.
The submission that the petitioner is registered as commercial establishment under the Karnataka Shops and Commercial Establishment Act, 1961 or that a trade licence has been issued by BBMP, suffice it to say that it is wholly irrelevant for the purposes of determining the eligibility of the petitioner under the exemption notification.
The order dated 31.08.2020 passed by the AAAR Karnataka is quashed and it is held that the service provided by the petitioner i.e., leasing out residential premises as hostel to students and working professionals is covered under Exemption Notification 'Services by way of renting of residential dwelling for use as residence'.
Copy of the Judgement
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Disclaimer: We have tried to simplify the Hon’ble Court Decision based on our understanding purely for academic purpose. In case, there is any mistake in understanding of the order, we are apologised to the Hon’ble Court. Further, tt should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.