2022 (9) TMI 1387 - HC - GST

Renting of residential accommodation - Constitutional Validity of Clause (A)(b) of the Notification No.04/2022-Central Tax (Rate) dated 13th July, 2022 - exemption available to tenants who are registered under GST or not - HELD THAT - The clarification that renting of a residential dwelling by a proprietor of a registered proprietorship firm, who rents it in his/her own personal capacity for use as his/her own residence as well as not for use in the course or furtherance of business of his/her proprietorship firm and such renting is on his/her own account and not that of proprietorship firm shall be exempt from GST, is accepted by this Court and all the respondents are held bound by the same. Petition disposed off.

Summary

Issues:
Challenge to Clause (A)(b) of Notification No.04/2022-Central Tax (Rate) dated 13th July, 2022 under Article 14 of the Constitution of India and GST Act, 2017.

Analysis:
The petitioner challenged Clause (A)(b) of a notification dated 13th July, 2022, arguing it was ultra vires Article 14 of the Constitution of India and beyond the powers conferred under the GST Act, 2017. The notification withdrew an exemption for renting residential accommodation to tenants registered under GST, impacting businesses like the petitioner's proprietary concern. The petitioner contended that denying the exemption based solely on GST registration lacked a rational basis and did not serve the intended purpose.

The respondents, in their counter affidavit, explained that the amendment aimed to impose GST on renting dwellings to businesses, while exempting non-business tenants. They clarified that exemptions would continue for residential rentals to individuals for personal use, not related to business activities. Subsequently, the respondents sought time to file a supplementary affidavit for further clarification.

In a second supplementary affidavit, the respondents highlighted that the government must tax or exempt goods and services based on GST Council recommendations. They acknowledged the need for clarity in the notification to specify GST applicability only when a registered person rents a dwelling for business purposes. The clarification confirmed that renting to a proprietor of a registered firm for personal use, unrelated to business activities, would remain exempt from GST.

The Court accepted the clarification, binding all respondents to exempt renting residential dwellings by proprietors of registered firms for personal use from GST. Consequently, the petition was disposed of without further orders, affirming the exemption for such rental transactions.