TMI Blog2024 (3) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... LD THAT:- In the present case, it is not in dispute that the inmates of the respective hostels run by the petitioners are the girl students and the working women who are not registered persons and using the premises as their residence, for which, they are paying fee, which can be termed as rent and it is not the case of the respondents that the inmates are carrying on any commercial activities in the rented premises or using the same for commercial purpose. That apart, the inmates of the room also using the common kitchen and sharing the foods as their own. Admittedly, GST is not applicable if a residential property is rented out to any persons in their personal capacity and for use as their own residence. The hostel rooms are the residential dwelling units for the girl student and working women, etc. The residential dwelling varies from person to person. As far as the homeless people are concerned, the residential dwelling will be wherever they are residing such as public roads, streets or in any other places and except the same, no other places can be provided, unless and otherwise if the Government has accommodated those people in a home, where they are maintaining the same for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue of levy of GST on residential accommodation should be viewed from the perspective of recipient of service and not from the perspective of service provider, who offers the premises on rental basis. Thus, the renting out the hostel rooms to the girl students and working women by the petitioners is exclusively for residential purpose, this Court is of the considered view that the condition prescribed in the Notification in order to claim exemption, viz., 'residential dwelling for use as residence' has been fulfilled by the petitioners and thus the said services are covered under Entry Nos.12 and 14 of the Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017, the petitioners are entitled to be exempted from levy of GST. The impugned orders passed by the 2nd respondent are hereby set aside - Petition allowed. - And W.M.P. Nos. 30034, 33982, 30044, 30045, 30037, 30040, 28034, 28038, 28041, 28063, 28064, 29629, 29630, 29631, 29633, 29634, 31001, 31003, 31004, 31009, 31010, 32968, 33091, 33249 and 33253 of 2023 Hon'ble Mr. Justice Krishnan Ramasamy For the Petitioner : Ms.Aparna Nandakumar in all Writ Petitions For the Respondents : Mr.A.P.Srinivas, Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter/Section/Heading/ Group/Service Code (Tariff) Description of Service Rate (%) Condition 1 HEADING: 9963 OR HEADING 9972 Services by way of renting of residential dwelling for use as residence. Explanation- For the purpose of exemption under this entry shall cover services by way of renting of residential dwelling to a registered person where the registration person is Proprietor of a Proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence and to such renting is on his own account and not that of the proprietorship concern . NIL NIL 5. By referring to the above, the petitioners herein would claim that since they are providing the residential accommodation to the girl students and working women, which can be termed as 'residential dwelling' used as residence by the inmates of the hostels and thereby, the charges/rent/tariff collected by them from the inmates on such accommodation, qualifies for GST exemption and therefore, they are entitled to the exemption from levy of GST tax. 6. Accordingly, claiming exemption, the petitioners moved applications before the Tamil Nadu State Appellate Authority for Advance Ruling/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate turnover in a financial year exceeds twenty lakh rupees. For Question No. 3: The supply of services by way of providing hostel accommodation falls under Tariff heading 9963 and is taxable @ 9% CGST + 9% SGST under Sl. No. 7(vi) of the Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended vide Notification No. 20/2019 - Central Tax (Rate) dated 30.09.2019. For Question No. 4: The activity of supply of inhouse food to the inmates of the hostel amounts to providing services in a composite manner and the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, is the tax rate for the composite supply provided by them. For Question No. 5: No ruling is issued, as the question put forth by the applicant does not fall under the scope of Section 97(2) of the GST Act. 8. The learned counsel appearing for the petitioner would submit that in the present case, the hostel services provided by the petitioners would squarely falls under the Entry No.12 of Exemption Notification No.12 of 2017. In the matter of Taghar Vasudeva Ambrish vs. Appellate Authority for Advance Ruling reported in MANU/KA/0327/2022, the Hon'ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l appearing for the respondents would submit that in the present case, since the alternate remedy under Section 100 of TNGST/CGST Act, is available, the petitioners are supposed to have filed the appeals instead of wrongly exercising the present jurisdiction of this Court. 12. Further, he would submit that though the Hon'ble Division Bench of the Karnataka High Court had passed an order stating that the hostel services falls under the exempted category from levy of GST, against the said order of the Hon'ble Division Bench, the respondents had preferred a Special Leave Petition before the Hon'ble Apex Court and the same is pending. At the same time, he would fairly submit that though the SLP has been filed, no stay has been granted by the Hon'ble Apex Court against the order of the Hon'ble Division Bench of Karnataka High Court. He would also contend that though no stay has been granted, the 2nd respondent can take his own view since the matter had not attained its finality and sub judice before the Hon'ble Supreme Court of India. Therefore, he would submit that the present writ petitions are liable to be dismissed on the ground of maintainability. In support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as clearly binding of the assessing authority under Section 42B(2) and although technically it would have been open to the appellants to urge their contentions before the appellate authority namely, the Appellate Assistant Commissioner, that would be a mere exercise in futility when a superior officer namely, the Commissioner, has already passed a well considered order in the exercise of his statutory jurisdiction under sub- section (1) of Section 42-B of the Act holding that 21 varieties of the compressed woollen felt manufactured by the appellants are not eligible for exemption under Entry 6 of Schedule I of the Act. Further Section 38(3) of the Act requires that a substantial portion of the tax has to be deposited before an appeal or revision can be filed. In such circumstances we consider that the High Court ought to have considered and pronounced upon the merits of the contentions raised by the parties and the summary dismissal of the Writ Petition was not justified. In such a situation, although we would have, ordinarily, set aside the judgement of the High Court and remitted the case to that Court for fresh disposal, we consider that in the present case it would be in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld bind the party which sought for it, but at the same time it would be open to the assessee to canvass the correctness of the clarification before the assessing officer or the appellate authority. In the impugned order of the Tribunal, reference was also made to a decision of a Division Bench of this Court in W.P.No .10709 of 1999 dated 24.6.1999. The Division Bench had held that a clarification issued under Section 28-A was not an adjudication and the clarification could be assailed before the assessing officer and before the appellate authority. In our opinion, the attention of the Full Bench of the Tribunal and the Division Bench of this High Court was not drawn to the various decisions of the Supreme Court referred to above. It has been repeatedly held in those decisions that a clarification or a circular can b e challenged under Article 226. It has been pointed out therein that once a clarification or circular is issued by a superior authority, it would be an exercise in futility to ask the assessee to raise an objection to the circular before an inferior authority, vide the Constitution Bench decision of the Supreme Court in Filterco v. CST (supra). Subsequently, it was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich accommodation is provided for women or children or both either with boarding or not, while the term 'residential hotel' is defined in Section 2(14) of the Tamil Nadu Shops Establishments Act, 1947 to mean 'any premises' in which business is carried on bona fide for the supply of dwelling accommodation and thus, 'hostel accommodation which falls within the purview of the Hostel Regulation Act cannot be equated with that of a 'hotel accommodation'. 22. In this regard, the learned counsel would rely upon the following case laws: i) Delhi High Court in V.L.Kashyap versus R.P.Puri rendered in Civil Revision Appeal Nos.322. 326, etc., vide order dated 22.09.1976; ii) United Kingdom House of Lords in Uratemp Ventures Limited versus Collins reported in (2001) 3 WLR 806; iii) High Court of Bombaby in Bandu Ravji Nikam versus Acharyaratna Shikshan Prasark Mandal (W.P. No. 4194/1989, dated 12.09.2002); iv) Karnataka High Court in Taghar Vasudeva Ambrish versus Appellate Authority for Advanced Rulings, Karnataka and Others (W.P. No. 14981/2020, dated 7.2.2022); 23. Therefore, the learned counsel appearing for the petitioners would submit that the Ruling passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parlance as per which, it is 'any residential accommodation', but does not include hotel, motel, inn, guest house, camp site, lodge, house boat, or like places meant for temporary stay. Generally, renting of residential dwelling involves letting out any building or part of the building by a lessor to a person or family (related persons) for rent towards the rental premises which form part of a house as kitchen, bedroom, and living room etc., on the whole as residence. Thus, a common understanding of the term residential dwelling is one where people reside treating it as a home. Moreover, renting of 'residential dwelling' does not include amenities, like food. housekeeping, or laundry etc., whereas, a hostel is nothing but an establishment which provides living accommodation to specific categories of persons such as girl students and working women. 28. Further, a 'house/ residential dwelling' for occupation contains one or more rooms with one part of the room being used as kitchen and the other/part as living room etc. But, in the instant case, a single house with two or more rooms, where, normally a single family resides, is subdivided, and let out to differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, rental income from residential properties did not attract service tax. This meant that landlords who owned commercial properties and rented them out were required to register for service tax and pay the tax on the rental income received. On the other hand, landlords who owned residential properties and rented them out were not required to register for service tax or pay tax on the rental income they received. 33. On introduction of GST, the tax regime for rental income has undergone a significant change. Under the GST regime, renting both commercial and residential properties is treated as a taxable supply of service. GST is applicable on rental income received by landlords as well as rent paid by tenants. 34. However, the Central Government, on being satisfied that it is necessary in the public interest and on the recommendation of the GST Council, has issued Notification No.12/2017-Central Tax (Rate) giving exemption from levying GST on various services described item wise in the Notification. For our purpose, it relates to Entry No.12 under 'Heading 9963 or Heading 9972' by which, an unconditional exemption was provided to renting of a residential dwelling to any pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (R), dated 28.6.2017, Clause (zz) refers 'renting in relation to immovable property' means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. 39. Further, in the said notification for renting of properties by the hotel, motel, inn, guest house, camp site, lodge, house boat, or like places meant for temporary stay has not been exempted. However in the Entry No.12 of Exemption Notification No.12 of 2017, the services provided by way of renting residential dwelling for using the same as residence has been exempted. When the said notification was passed, the Legislature had intentionally not included the hostels so as to bring it into the tax net. However, only in the clarification regarding GST in respect of certain services issued by the Ministry of Finance Department dated 12.02.2018, the following issue was raised: Is the hostel, provided by the Trust to students, will be covered within the definition of Chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building. It would include the out-houses, courtyard, orchard, garden etc. which are part of the same house, but it cannot include a distinct separate house. ii) United Kingdom House of Lords in Uratemp Ventures Limited versus Collins (2001) 3 WLR 806, wherein, the term 'dwelling house' has been interpreted to mean even a single room as part of a house. iii) High Court of Bombaby in Bandu Ravji Nikam versus Acharyaratna Shikshan Prasark Mandal (W.P. No. 4194/1989, dated 12.09.2002). In this case, a suit for eviction of a tenant was contested by the contesting tenant that the landlord was attempting to evict him in order to lease out the premises to a hostel and that hostel accommodation amounted to 'non residential accommodation' which was impermissible under Section 25 of Bombay Rent Control Act. The High Court has held that by the very nature of the use of students hostel, it is only a residential user as hostel, is a house of residence or lodging for students and that just because the hostel owners charge some amount from the students, such accommodation cannot be treated as commercial or non residential. iv) Karnataka High Court in Taghar Vasudeva Ambrish versu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). This court has held that the word residence may receive a liberal meaning, for a man's residence is very often the place where he sleeps at night. This court in the said case adverted to the decision of the Privy Council (AIR 1937 PC 46), wherein it is observed that there is no reason for assuming that it contemplates only permanent residence and excludes temporary residence . Reference is also made to wherein it is observed that, Residence only connotes that a person eats, drinks and sleeps at that place and that it is not necessary that he should own it . This Court then proceeded to hold that the legislature is using words non-residential purpose in Section 25 did not intend to prohibit use of a building containing a residential flat for the purposes of construction of Marriage Halls, Charitable Hospitals and quarters and garages for Doctors and Nurses. As in the present case, Students hostel was also to be used for sleeping, eating, studies etc. temporarily if not permanently day to day, it cannot be described as non-residential use within the meaning of Section 25 of the Act. Accordingly, if the suit premises were to be used as students hostel, then surely it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g can be assigned to the expression residential dwelling and accordingly, this Court is of the view that the same does include hostel which is used for residential purposes by students or working women. 50. A perusal of the impugned Rulings passed by the second respondent, this Court finds that the authority has primarily concluded that hostel building cannot be considered as residential dwelling, but a non-residential complex, based on the following observations, viz., i) that the petitioners have rented out the premises with the intention of providing hotel accommodation which is more akin to sociable accommodation rather than what is typically considered as residential accommodation; ii) that a single house with two or more rooms where normally a single family resides, is subdivided and let out to different persons and rent being collected on per bed basis with bundle of other services against a consideration clearly constitutes a business of supplying accommodation services along with ancillary services and thus on this count, the hostel accommodation does not qualify as a residential dwelling and the question of using the same as residence does not arise; iii) that though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with the matter in regard to the services provided by the petitioners by renting out the hostel rooms to the girl students and working women and whether such services are in the nature of residential or commercial in order to find out whether the petitioners are entitled to the exemption. But unfortunately, the 2nd respondent has dealt with the matter pertaining to the building/premises let out by the petitioners and compared the same with that of the hotels and came to the conclusion that the building/premises rented out by the petitioners are not residential dwelling for use as residence. Therefore, this Court is of the view that the impugned Ruling passed by the 2nd respondent, is not sustainable and the same is liable to be set aside. 52. In the present case, it is not in dispute that the inmates of the respective hostels run by the petitioners are the girl students and the working women who are not registered persons and using the premises as their residence, for which, they are paying fee, which can be termed as rent and it is not the case of the respondents that the inmates are carrying on any commercial activities in the rented premises or using the same for commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a home, where they are maintaining the same for homeless. Therefore, when for the homeless persons, the residential dwelling will be the places wherever they are residing, where, even they do not have cooking, washing and toilet, etc., facilities by itself it does not mean that their place is not a residential dwelling. For their sake of convenience, they reside in one place and used to get food and do washing and other activities from different places. If they are accommodated in a home provided by the Government for the homeless people, the said premises/hostel will be their residential dwelling and therefore it depends upon the status and the lifestyle of each person, the nature of residential dwelling will vary. Merely because the persons are staying in hostel rooms due to their financial condition, the same will not take away the status of the said hostel room as residential dwelling for the inmates of the room, because after their avocation, they have been staying, sleeping, eating, washing, etc in the hostel rooms alone. 55. As per the 2nd respondent's perspective, a working woman, who is drawing the salary of around a sum of Rs. 15,000/- to Rs. 20,000/- and paying h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant extract of the notification is extracted below for the facility of reference: In exercise of powers conferred by [sub Section (3) ad sub Section (4) of Section 5, sub-Section (1) of Section 6 and clause (xxv) of Section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), read with sub-Section (5) of Section 15 and Section 148 of the Central Goods and Services Tax At, 2017 (12 of 2017)], the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the inter-State supply of services of description as specified in column (3) of the Table below from so much of the Integrated Tax leviable thereon under Sub-Section (1) of Section 5 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified in the corresponding entry in column (5) of the said Table, namely:- Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 13 Heading 9963 or Heading 9972 Services by way of renting of residential dwelling for use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to note that under the erstwhile service tax law, the expression 'residential dwelling' was defined in paragraph 4.13.1 of Taxation of Services: An Education Guide dated 20.06.2012 which was issued by Central Board of Indirect taxes and Customs which is reproduced below for the facility of reference: 4.13.1 What is a 'residential dwelling'? The phrase 'residential dwelling' has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp - site, lodge, house boat, or like places meant for temporary stay. Thus in the aforesaid education guide issued by Central Board of Indirect Taxes and Customs which contains clarifications, it is provided that in normal trade parlance residential dwelling means any residential accommodation and is different from hotel, motel, inn, guest house etc. which is meant for temporary stay. The aforesaid clarification which is issued by the Board, in the absence of anything to the contrary in the Act, binds the Respondent. 13. It is noteworthy that the accommodation which is u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' and it cannot be held that the same does not include hostel which used for residential purposes by students or working women. 15. The twin questions which need to be answered in order to ascertain whether the service provided by the petitioner is covered under exemption notification are: (i) What is being rented? (ii) The purpose for which the residence is used for. Firstly, the residential dwelling is being rented, as the hostel to the students and working women fall within the purview of residential dwelling as the same is used by the students as well as the working women for the purposes of residence. Secondly, the residential dwelling is being used for the purposes of residence. Thus, the aforesaid questions are required to answered in favour of the petitioner. It is also worth mentioning that the notification does not require the lessee itself use the premises as residence. Therefore, the benefit of exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises. Similarly, the finding recorded by AAAR Karnataka that the hostel accommodation is more akin to 'sociable accommodation' is unintelligible and is not rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oting economic growth or otherwise has some beneficial reason behind it. 61. Even on adopting the purposive interpretation having regard to the object and intent of the present exemption Notification, this Court finds that the purport and object of the legislation in issuing the present Notification is only to give exemption towards the services which are in residential nature and not towards commercial nature and the premises should be of residential dwelling for use as residence. The purpose of exemption given in the Notification is only to lessen the burden of tax on the dwellers, who are the tenants/occupants of the residential premises taken on rent. 62. In the present case, the imposition of GST on the Hostel accommodation should be viewed from the perspective of the recipient of service and not from the perspective of service provider. However, the 2nd respondent has dealt with the entire issue as if GST is going to be imposed on the revenue of the service provider and he is going to pay the same from and out of his pocket. On the other hand, the imposition of GST is only on the recipient of service and the GST is going to be collected only from the recipient of the service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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