State of Karnataka & Anr. Vs Taghar Vasudeva Ambrish & Anr. (Supreme Court of India)
The Supreme Court of India heard two connected appeals arising from the judgment of the Karnataka High Court dated 07.02.2022 in Writ Petition No. 14891/2020. The High Court had set aside the ruling of the Appellate Authority for Advance Ruling (AAAR), Karnataka, which denied GST exemption on renting of residential premises used as a hostel. The Supreme Court considered whether GST at 18% was payable by the lessee on the rent paid to the property owner under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017.
The first respondent (property owner) co-owned a residential building in Bangalore consisting of 42 rooms across four floors. On 21.06.2019, the owners leased the entire building to M/s DTwelve Spaces Pvt. Ltd., which in turn sub-leased the premises as a hostel for students and working professionals for long-term stays ranging from 3 to 12 months. Seeking clarification on GST applicability, the owner approached the Authority for Advance Ruling (AAR). The AAR ruled on 23.03.2020 that the exemption under Entry 13 was unavailable because the lessee, being a company, did not itself use the premises as a residence. The AAR held that the property was not being used by the lessee as a residential dwelling and therefore GST was chargeable.
