The court affirmed that leasing of premises as a hostel for students constitutes a residential dwelling under GST law, qualifying for tax exemption regardless of the lessee's use.

JUDGMENT :

J.B. PARDIWALA, J.

1. Since the issues raised in both the captioned appeals are the same and the challenge is also to the self-same judgment and order passed by the High Court of Karnataka, those were taken up for hearing analogously and are being disposed of by this common judgment and order.

2. These appeals arise from the judgment and order passed by the High Cout of Karnataka dated 07.02.2022 in Writ Petition No. 14891 of 2020 by which the writ petition filed by respondent No. 1 herein (original petitioner) was allowed thereby setting aside the order dated 31.08.2020 passed by the Appellate Authority for Advance Ruling, Karnataka (for short, “the AAAR”). The AAAR in its ruling had declared while affirming the ruling of the Authority for Advance Ruling, Karnataka (for short, “the AAR”) that the services provided by the respondent No. 1 herein (original petitioner) in the form of leasing of residential premises as hostel to students and working professionals does not fall within the ambit of Entry 13 of the Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017. In other words, the respondent No. 1 herein would not be entitled to the exemption on services viz. renting of residential dwelling for use as a residence under Entry 13 of the Notification No. 9/2017 dated 28.06.2017.

FACTUAL MATRIX

3. The facts giving rise to these appeals may be summarised as under.

4. The respondent No. 1 before us is the co-owner of a residential property situated in Bangalore. The property consists of 42 rooms. It is a four storied building with terrace and common area. On 21.06.2019 the respondent No. 1 along with other the co-owners executed a lease deed in favour of M/s DTwelve Spaces Private Limited (fort short, “the lessee”). The lessee in turn leased out the residential property as hostel to provide long term accommodation to students and working professionals with the duration of stay ranging from 3 months to 12 months.

5. The Central Government by way of Notification No.9/2017- Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as “the Exemption Notification”) has granted exemption from payment of goods and services tax in respect of services which includes renting services which are provided with respect to residential dwelling for use as residence.

6. The respondent No. 1 herein (original petitioner) with a view to seek clarification with regard to his eligibility to claim exemption on the rent received by him from the lessee by letting the property preferred an Advance Ruling application in the prescribed Form under Section 97 of the Integrated Goods and Services Tax Act, 2017 (for short, “the Act”) before the AAR. The AAR vide its ruling dated 23.03.2020 inter alia held that the services viz. renting of residential dwelling for use as a residence do not fall under Entry 13 of the Exemption Notification. It held that the lessee being a company is not itself using the premises in question. In such circumstances, it was held by the AAR that the respondent No. 1 herein has to charge goods and services tax (for short, ‘GST’) while issuing invoices to the lessee provided it was registered under the Act. Accordingly, it was held that the benefit of Exemption Notification is not available to the respondent No.1 herein (original petitioner).

7. The respondent No. 1 herein (original petitioner) being dissatisfied with the ruling of the AAR filed an appeal under Section 100 of the Act before the AAAR. The AAAR vide order dated 31.08.2020 inter alia while affirming the AAR’s ruling held that the property rented out by the respo