• Notification Date: 12-02-2022
  • Notification No: N/A

GST Claims can be made by Building Owners for Residential Premises used as Hostel

The Karnataka High Court has passed the new ruling approving that a building owner is eligible to claim goods and service tax (GST) exemptions if their residential premises are used as a hostel. The owner can avail of the benefit if their premises are leased out as hostel lodging for house students and working professionals.

The petition had been filed by Taghar Vasudeva Ambrish. The decision, approving the appeal of the petitioner, has been taken by a division bench of the Karnataka High Court, comprising Justice Alok Aradhe and Justice M I Arun. 

The bench has stated that the demand of offering tax exemption to the owner of the residential premises who has leased out their building for hostel accommodation purposes is covered under Entry 13 of Notification No.9/2017 dated 28.09.2017. It is mentioned under the ‘Services by way of renting of residential dwelling for use as a residence' that has been issued under the Act. As per the rule, the petitioner is entitled to enjoy the benefit of tax exemption under the Act.

The petitioner, who has appealed for the GST exemption, is a co-owner of residential property in Bengaluru. He filed a lease deed in favour of the lessee. The lessee is M/s. D Twelve Spaces Private Limited. The company leased out the property as a hostel that was providing long term lodging for the professionals and students. The petitioner filed an Advance Ruling application under Section 97 of the Act. He wanted to seek clarification regarding his eligibility to avail of the GST exemption on the rent that he receives from the lessee of his property for hostel accommodation purposes. He presented his petition file to the Authority of Advance Ruling of Karnataka. The AAR department of Karnataka has examined the matter and has decided that renting residential property for the use of residential purposes as a hostel does not fall under the exemption category under Entry 13. The AAR further added that the owner of the property is not using the residential property for his own accommodation purpose. So, the petitioner has to charge GST under the Act during the issue of invoices to the lessee.

This ruling passed by the Authority of Advance Ruling has been opposed by terming it as a sociable accommodation rather than a residential accommodation. The building has been rented out as a hostel building. So, the owner is not entitled to charge GST on the invoices.

Protests have been raised against the charging of GST on the invoices with the logic that zoning regulations in Bengaluru approve the usage of residential plots as hostel accommodation. So, hostel accommodation should be treated as residential accommodation.