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Case tittle |
Taghar Vasudeva Ambrish VS Appellate Authority for Advance Ruling |
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Court |
Karnataka High Court |
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Honourable Judge |
Justice Alok Aradhe Justice M.I. Arun |
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Citation |
2022 (02) GSTPanacea HC 673 Karnataka W.P. NO. 14891 OF 2020 (T-RES) |
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Judgment Date |
07-February-2022 |
The petitioner is a co-owner of a residential property located in Bengaluru. This property is extensive, comprising a total of 42 rooms distributed across a stilt floor, a ground floor, four additional floors, a terrace, and common areas. On June 21, 2019, the petitioner, along with other co-owners, executed a lease deed in favor of M/s. D Twelve Spaces Private Limited, hereinafter referred to as “the lessee.”
The lessee has utilized this residential property as a hostel, providing long-term accommodation primarily for students and working professionals. The typical duration of stay for tenants ranges from three months to twelve months.
This case pertains to an exemption from the payment of Goods and Services Tax (GST) for certain services, including renting services related to residential dwellings for use as a residence.
The petitioner sought clarification regarding his eligibility for this exemption on the rent he received from a lessee. To obtain this clarification, he filed an Advance Ruling application under Section 97 of the GST Act before the Authority for Advance Ruling, Karnataka (AAR Karnataka).
On March 23, 2020, the AAR Karnataka issued an Advance Ruling. The ruling stated that renting a residential dwelling for use as a residence does not fall under Entry 13 of the Exemption Notification. Additionally, the AAR noted that the lessee was not using the accommodation for residential purposes. Consequently, the petitioner was required to charge GST on the rent while issuing invoices to the lessee, provided the lessee is registered under the Act. Therefore, the benefit of the exemption notification was not available to the petitioner.
The petitioner in this case sought clarification regarding his eligibility for an exemption from the payment of Goods and Services Tax (GST) on the rent he received from leasing his property. This exemption is applicable for services related to renting residential dwellings for use as a residence. To clarify his position, the petitioner filed an Advance Ruling application under Section 97 of the GST Act with the Authority for Advance Ruling, Karnataka (AAR Karnataka).
On 23.03.2020, AAR Karnataka issued an Advance Ruling stating that the renting of residential dwellings for use as a residence does not qualify under Entry 13 of the Exemption Notification. AAR Karnataka further noted that the lessee was not using the accommodation themselves, leading to the conclusion that the petitioner must charge GST when invoicing the lessee, provided the lessee is registered under the GST Act. Consequently, the exemption notification’s benefit was deemed unavailable to the petitioner.
Following this decision, the petitioner filed an appeal under Section 100 of the GST Act with the Appellate Authority for Advance Ruling, Karnataka (AAAR Karnataka). However, on 31.08.2020, AAAR Karnataka upheld the previous ruling, stating that the property rented by the petitioner was a hostel building, which is considered more akin to sociable accommodation than traditional residential accommodation. Therefore, it could not be classified as a residential dwelling. AAAR Karnataka also affirmed that the exemption is only available if the residential dwelling is used as a residence by the person renting or leasing it.
As a result of these rulings, the petitioner’s appeal was dismissed, leading him to file this writ petition, challenging the decisions of both AAR Karnataka and AAAR Karnataka.
The primary argument is that residential accommodations used for long-term stays should be classified as residential dwellings. Zoning regulations in Bengaluru explicitly allow hostels to operate on residential plots, supporting the claim that hostels, being used by students for residential purposes, should be considered residential accommodations.
The argument emphasizes the need for a purposive interpretation when interpreting exemption notifications, meaning the interpretation should consider the purpose and objective of the regulation. The exemption notification does not specify that only tenants must occupy the building, so additional conditions should not be inferred.
It is further argued that the activities carried out by the petitioner in running a hostel do not constitute a business activity, as the premises are used for residential purposes. A clear distinction is made between a hotel or lodging house and a student hostel. The submission references a Supreme Court decision in ‘State of Kerala vs.’ to support these arguments, although the complete citation is not provided.
In this case, it is argued that residential accommodations intended for long-term stays should be classified as residential dwellings. The zoning regulations of Bengaluru explicitly permit hostels to operate on residential plots. This argument highlights that students utilize hostels for residential purposes, thus hostels should be considered as residential accommodations. It is emphasized that a purposive interpretation should be applied when interpreting an exemption notification, focusing on the purpose and objective of the regulation.
It is further argued that the exemption notification does not stipulate that only tenants must occupy the building, suggesting that no additional conditions should be imposed. The petitioner contends that their activity is not a business but is solely for residential purposes. There is a clear distinction between hotels or lodging houses and student hostels. In support of this argument, reliance is placed on a Supreme Court decision in ‘STATE OF KERALA Vs. …’
Conversely, the respondents’ counsel argues that the lessee operates a business of leasing out premises. They assert that the term ‘residential dwelling’ used in the exemption notification should not be interpreted as simply ‘residence.’ Instead, ‘residential dwelling’ implies an abode or habitat with a degree of permanency. They also point to the trade license issued by the Bruhat Bengaluru Mahanagara Palike (BBMP) to the lessee, indicating that the trade name is described as boarding and lodging.
The case revolves around the interpretation of an exemption notification concerning the classification of hostels as residential accommodation. The petitioner argues that long-term residential accommodation, such as hostels used by students, should be considered residential dwellings under Bengaluru’s zoning regulations. They advocate for a purposive interpretation of the exemption notification, emphasizing that it does not impose a condition that only tenants must occupy the building.
On the other hand, the respondents assert that the lessee is engaged in a commercial leasing business, citing the trade license and registration under commercial laws. They argue that “residential dwelling” in the exemption notification should be interpreted narrowly to exclude commercial activities, highlighting the commercial nature of the petitioner’s operations as per the lease terms and local regulations.
Both parties rely on legal precedents to support their arguments: the petitioner cites a Supreme Court decision emphasizing the distinction between hotels and student hostels, while the respondents refer to another Supreme Court decision stressing strict construction of exemption notifications and interpreting ambiguities in favor of revenue.
The dispute hinges on whether the activities of the petitioner qualify as residential for the purpose of the exemption notification, considering the broader context of zoning laws and the commercial nature alleged by the respondents.
This summary captures the key arguments and positions of both sides in the legal dispute.
The petitioner contends that residential accommodation used for long-term stay should be construed as a residential dwelling. They argue that Bengaluru’s zoning regulations permit hostels to operate in residential category plots, and students use hostels primarily for residential purposes. Therefore, hostels should be treated as residential accommodation under the principle of purposive interpretation, aligning with the purpose and object of exemption notifications.
It’s further argued that the exemption notification does not stipulate that only tenants must occupy the building, thus additional conditions cannot be imposed. The petitioner asserts that their activities are not commercial but residential, emphasizing the distinction between hotels/lodging houses and student hostels.
On the contrary, the respondents argue that the lessee engages in a business of leasing premises and that “residential dwelling” in the exemption notification should not be equated with “residence,” implying a permanency element. They point to the trade license issued by BBMP, describing the lessee’s business as boarding and lodging, open to the public with or without food or drink consumption. The respondents cite the lessee’s registration under commercial laws and terms of the lease deed to support their contention of commercial activity.
The respondents urge strict construction of the exemption notification and cite legal precedent favoring revenue interpretation in cases of ambiguity.
Upon review of these arguments, the court must decide on the application of the exemption notification in the context of the activities carried out by the petitioner, considering both residential and commercial aspects as presented by the parties.
The passage you’ve provided seems to be a legal excerpt concerning exemptions from the payment of Goods and Services Tax (GST) in India, particularly related to renting residential dwellings for use as residences. Here’s a summarized interpretation:
Under the Integrated Goods and Services Tax Act, 2017, the Central Government has issued an exemption notification. This notification grants exemption from the Integrated Tax (IGST) on specified inter-State supplies of services, including renting residential dwellings for use as residences. The exemption applies to the portion of IGST that exceeds the tax calculated at specified rates.
The authority for issuing this exemption stems from various sections of the Integrated Goods and Services Tax Act, as well as the Central Goods and Services Tax Act, based on the public interest and recommendations of the GST Council.
If you need more detailed information or further clarification on any specific aspect, feel free to ask!
The passage you provided concerns the exemption from Goods and Services Tax (GST) on certain services, specifically the renting of residential dwellings for use as residences. The Central Government, empowered by various sections of the Integrated Goods and Services Tax Act, 2017, has issued a notification granting this exemption. This exemption applies to inter-State supplies of services listed in the notification, reducing the Integrated Tax levied on these services.
The notification underscores that exemptions under GST should be interpreted strictly, placing the burden on the taxpayer (assessee) to demonstrate that their situation qualifies under the exemption clause. This principle was affirmed by the Supreme Court in the case of ‘DILIP KUMAR AND COMPANY AND OTHERS’, highlighting that the applicability of exemptions must be clearly and convincingly demonstrated by the taxpayer.
In essence, while the government has exempted certain services from GST, including residential renting, it is crucial for taxpayers to adhere strictly to the conditions specified in the notification to benefit from these exemptions.
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