Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-007846-007846 – 2023 |
| Diary Number | 29980/2022 |
| Judge Name | HON’BLE MR. JUSTICE J.B. PARDIWALA |
| Bench | HON’BLE MR. JUSTICE J.B. PARDIWALA; HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Precedent Value | Binding authority on the interpretation of GST exemption notifications |
| Overrules / Affirms | Affirms the High Court judgment and order |
| Type of Law | Tax Law – Goods and Services Tax |
| Questions of Law | Whether leasing of residential premises as a hostel to students and working professionals qualifies for exemption under Entry 13 of Notification No. 9/2017 and whether sub-leasing by the lessee affects eligibility. |
| Ratio Decidendi |
|
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by Court |
|
| Facts as Summarised by the Court | Respondent, co-owner of a 42-room residential building in Bangalore, leased it to an aggregator (DTwelve Spaces) for sub-letting as long-term hostel accommodation; AAR and AAAR denied Entry 13 exemption; Karnataka High Court allowed writ petition holding hostel leases qualify as residential rentals; revenue appeals. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts and tribunals interpreting GST exemption notifications |
| Persuasive For | High Courts, GST Appellate Tribunals |
| Overrules | None |
| Distinguishes | None |
| Follows | Precedents on exemption interpretation—Wood Papers Ltd., Parle Exports, Mother Superior |
What’s New / What Lawyers Should Note
- Entry 13 exemption applies to leasing of residential dwellings used as long-term hostels; no requirement that the immediate lessee must occupy the premises personally.
- Hostels for students and working professionals qualify as “residential dwelling” under GST exemption criteria.
- Exemption notifications are to be construed strictly at the threshold but liberally once conditions are met.
- The 18.07.2022 amendment disallowing exemption for leases to registered persons applies prospectively only; pre-amendment leases remain covered.
- Subsequent Explanation (effective 01.01.2023) confirms exemption for registered lessees renting for their own residence, underscoring policy to exempt genuine residential rentals.
Summary of Legal Reasoning
- Definition of “Residential Dwelling”
Absent in GST law, Court adopted CBIC Education Guide and case law (Kashyap, Uratemp, Bandu Nikam) and dictionary meaning to include long-term hostels. - Three-Condition Test under Entry 13
(i) Supply of renting service, (ii) property is a residential dwelling, (iii) used as a residence. All satisfied by respondent’s lease to DTwelve Spaces and sub-leases to individuals. - Lessee-Use Requirement
Entry 13 does not require the immediate lessee to occupy; sub-lease to end-users for residential use suffices. - Strict-Then-Liberal Construction of Exemptions
Apply exemption notifications strictly to determine applicability; once applicable, interpret them purposively and liberally to effect legislative intent. - Prospective Effect of Amendments
The 18.07.2022 amendment and 01.01.2023 Explanation operate prospectively, leaving pre-amendment leases unaffected.
Arguments by the Parties
Petitioner (Revenue):
- Entry 13’s three limbs must be conjunctively satisfied, including lessee’s personal use as residence.
- Only the first supply (lessor→lessee) can be tested; sub-lease facts cannot fulfill the third limb.
- Large multi-room property is akin to commercial accommodation and excluded under CBIC’s Education Guide.
- Exemptions must be strictly construed; beneficial interpretation cannot rewrite the notification.
Respondent (Lessee):
- The 42-room property is a residential dwelling used solely for long-term residential purposes by students and professionals.
- No textual requirement that the lessee must occupy; sub-letting for residential use satisfies Entry 13.
- All three limbs of the exemption are met; High Court correctly applied purposive interpretation.
Factual Background
Respondent co-owned a four-storey, 42-room residential property in Bangalore. On 21.06.2019, he leased it to DTwelve Spaces Private Limited, which sub-let rooms as long-term hostel accommodation (3–12 months) to students and working professionals. The AAR and AAAR denied GST exemption under Entry 13 of Notification No. 9/2017, but the Karnataka High Court allowed a writ petition, holding the lease qualifies as an exempt residential rental. The State appealed.
Statutory Analysis
- Notification No. 9/2017 (Exemption Notification)
Entry 13: “Services by way of renting of residential dwellings for use as residence” are exempt from GST. - Definition Guidance
CBIC Education Guide (20.06.2012): “‘Residential dwelling’…any residential accommodation, but does not include hotel, motel, inn, guest house…meant for temporary stay.” - 2022 Amendment (w.e.f. 18.07.2022)
Exemption excludes leases to registered persons. - 2023 Explanation (w.e.f. 01.01.2023)
Exemption covers registered persons leasing for personal residence on their own account.
Dissenting / Concurring Opinion Summary
No separate dissenting or concurring opinions were filed; judgment delivered unanimously by a two-judge bench.
Procedural Innovations
None identified; the decision follows established writ and appellate procedures under Section 97–100 of the CGST Act, 2017.
Alert Indicators
- ✔ Precedent Followed – Confirms established principles of exemption interpretation
- 📅 Time-Sensitive – Prospective effect of GST amendments (18.07.2022 and 01.01.2023)