Leasing of Building for use as HostelWhether Qualifies as a Residential DwellingAkash Phophalia

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The Tax Publishers GST-- Residential dwelling Leasing of Building for use as Hostel--Whether Qualifies as a Residential Dwelling Akash Phophalia This article throws light on the meaning of residential dwelling and aims at clarifying whether exemption is admissible to residential dwelling even when such residential dwelling is not directly used by the lessee. 1. Introduction Exemptions to residential dwellings used for residential purpose has been borrowed from service tax regime and the legacy has carried forward in GST regime also. Although residential dwellings used for residential purpose are exempted from GST however situation needs to be clarified whether GST is applicable on transaction between lessor and lessee where the lessee had taken property on lease and thereafter let it out for residential purpose. In this article, this issued is being discussed in the light of a decision passed by Karnataka High Court in the matter of Taghar Vasudeva Ambrish v. Appellate Authority for Advance Ruling WP No. 14891 of 2020 (T-RES) decided on 7th February 2022. 2. Factual Background The factual background is that the assessee is owner of a residential property. The property is a residential property having many rooms all spread out between a stilt floor, ground floor and four floors along with terrace and common areas. He executed a lease deed in favour of the lessee and the lessee had leased out the residential property as hostel for providing long term accommodation to students and working professionals with the duration of stay ranging from 3 months to 12 months. Assessee claimed benefit of exemption notification stating that if residential dwelling is used for residence then no GST is payable. The department remarked this transaction between X and lessee as taxable on the argument that the said property is not being used by lessee directly and therefore the benefit of exemption claimed by assessee is not admissible to it. 3. Legal Provision The Central Government had issued Notification No. 9/2017--Integrated Tax (Rate), dated 28-6-2017 (hereinafter referred to as 'exemption notification') and had granted exemption from payment of goods and services in respect of services mentioned therein which includes renting services which are provided with respect to residential dwelling for use as residence. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST-- Residential dwelling

Leasing of Building for use as Hostel--Whether Qualifies as a Residential Dwelling

Akash Phophalia

This article throws light on the meaning of residential dwelling and aims at clarifying whether exemption is admissible to residential dwelling even when such residential dwelling is not directly used by the lessee.

1. Introduction

Exemptions to residential dwellings used for residential purpose has been borrowed from service tax regime and the legacy has carried forward in GST regime also. Although residential dwellings used for residential purpose are exempted from GST however situation needs to be clarified whether GST is applicable on transaction between lessor and lessee where the lessee had taken property on lease and thereafter let it out for residential purpose. In this article, this issued is being discussed in the light of a decision passed by Karnataka High Court in the matter of Taghar Vasudeva Ambrish v. Appellate Authority for Advance Ruling WP No. 14891 of 2020 (T-RES) decided on 7th February 2022.

2. Factual Background

The factual background is that the assessee is owner of a residential property. The property is a residential property having many rooms all spread out between a stilt floor, ground floor and four floors along with terrace and common areas. He executed a lease deed in favour of the lessee and the lessee had leased out the residential property as hostel for providing long term accommodation to students and working professionals with the duration of stay ranging from 3 months to 12 months. Assessee claimed benefit of exemption notification stating that if residential dwelling is used for residence then no GST is payable. The department remarked this transaction between X and lessee as taxable on the argument that the said property is not being used by lessee directly and therefore the benefit of exemption claimed by assessee is not admissible to it.

3. Legal Provision

The Central Government had issued Notification No. 9/2017--Integrated Tax (Rate), dated 28-6-2017 (hereinafter referred to as 'exemption notification') and had granted exemption from payment of goods and services in respect of services mentioned therein which includes renting services which are provided with respect to residential dwelling for use as residence.