Point of Law : Benefit of exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises.

ORDER :

Alok Aradhe, J.

In this writ petition, the solitary question which arises for consideration is whether the service provided by petitioner i.e., leasing of residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely 'Services by way of renting of residential dwelling for use as residence' issued under Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as 'the Act' for short).

FACTUAL BACKGROUND

2. The factual background in which the aforesaid question arises for consideration need mention. The petitioner is co-owner of a residential property situate in Bengaluru. The property is a residential property having 42 rooms in all spread out between a stilt floor, ground floor and four floors along with terrace and common areas. The petitioner along with other co-owners have executed a lease deed in favour of the lessee namely M/s. D Twelve Spaces Private Limited (hereinafter referred to as 'the lessee') on 21.06.2019. The lessee has 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.

3. The Central Government has issued notification No.9/2017 - Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as 'exemption notification') and has 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.

4. The petitioner with a view to seek clarification with regard to his eligibility to seek exemption on the rent received by him from the lessee by letting the property, filed an Advance Ruling application in prescribed form under Section 97 of the Act before the Authority for Advance Ruling, Karnataka (hereinafter referred to as 'AAR Karnataka'). The AAR Karnataka vide Advance Ruling dated 23.03.2020 inter alia held that services viz., renting of residential dwelling for use as a residence do not fall under Entry 13 of the Exemption Notification. It was further held that lessee itself is not using the accommodation. Thus, it was held that the petitioner has to charge Goods and Services Tax (hereinafter referred to as 'GST') while issuing invoice to the lessee provided it is registered under the Act. Accordingly, it was held that benefit of exemption notification is not available to the petitioner.

5. The petitioner thereupon filed an appeal under Section 100 of the Act before the Appellate Authority for Advance Ruling, Karnataka (AAAR Karnataka). However, the AAAR Karnataka by an order dated 31.08.2020 inter alia held that property rented out by the petitioner is a hostel building which is more akin to sociable accommodation rather than what is commonly understood as residential accommodation. Therefore, the property rented out by the petitioner cannot be termed as residential dwelling. It was further held that benefit of exemption notification is available only if the residential dwelling is used as a residence by the person who has taken the same on rent/lease. In the result, the appeal preferred by the petitioner was dismissed. In the aforesaid factual background, this writ petition has been filed.

6. Learned Senior counsel for the petitioner submitted that the expression 'residential dwelling' has not been defined anywhere in the Act. Therefore, its normal trade parlance meaning has to be taken into account. It is submitted that residential accommodation which is used for long term stay has to be construed as residential dwelling. It is further submitted that zoning regulations of Bengaluru clearly provide that hostels are allowed to operate in residential category plots. It is contended that students use the Hostel for residential purposes. Therefore,