2022 (2) TMI 780 - HC - GST

Exemption from GST - leasing of residential premises as hostel to students and working professionals - covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely 'Services by way of renting of residential dwelling for use as residence' issued under Integrated Goods and Services Tax Act, 2017 or not - HELD THAT - It is well settled rule of Statutory Interpretation of fiscal statues that the words used therein if not defined in the statute have to be interpreted in their popular sense. As per Craies on statute law 6th edition, the popular sense means the sense in which people conversant with the subject matter with which the statute is dealing, would attribute it. Entry 13 contained in the exemption notification is unambiguous and is clear. It provides for exemption from payment of Integrated Goods and Service Tax in respect of 'services by way of renting of residential dwelling by way of use as residence'. The burden is of course on the petitioner to show that his case comes within the parameters of the exemption notification. The expression 'residential dwelling' has not been defined. It is 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 - in the 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. It evident that the expression 'residence' and 'dwelling' have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression 'residential dwelling' and it cannot be held that the same does not include hostel which used for residential purposes by students or working women. The service provided by the petitioner i.e., leasing out residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely 'Services by way of renting of residential dwelling for use as residence' issued under the Act. The petitioner is held entitled to benefit of exemption notification. Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Interpretation of "residential dwelling" under Entry 13 of Notification No. 9/2017 dated 28.09.2017.
2. Eligibility for GST exemption on leasing residential premises as hostels.
3. Applicability of principles of statutory interpretation to exemption notifications.

Issue-wise Detailed Analysis:

1. Interpretation of "residential dwelling" under Entry 13 of Notification No. 9/2017 dated 28.09.2017:

The primary issue was whether the service of leasing residential premises as hostels falls under the exemption for "renting of residential dwelling for use as residence" as per Notification No. 9/2017 under the Integrated Goods and Services Tax Act, 2017. The petitioner argued that the term "residential dwelling" should be interpreted in its normal trade parlance, meaning any residential accommodation used for long-term stay, including hostels for students and working professionals. The respondents contended that "residential dwelling" implies an abode with an element of permanency, and the lessee's commercial use of the property disqualifies it from being considered a residential dwelling.

The court referred to the definition of "residential dwelling" under the erstwhile service tax law and various dictionary definitions, concluding that the term includes any residential accommodation used for living purposes, distinguishing it from temporary accommodations like hotels or guest houses.

2. Eligibility for GST exemption on leasing residential premises as hostels:

The petitioner sought clarification on whether the rent received from leasing the property as a hostel was exempt from GST. Both the Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) in Karnataka had previously ruled against the petitioner, stating that the property was used for commercial purposes and did not qualify as a residential dwelling. The court, however, found that the hostels were used by students and working professionals for residential purposes, with stays ranging from 3 to 12 months, and thus qualified as residential dwellings. The court emphasized that the exemption notification does not require the lessee to use the premises as a residence themselves, and the purpose of the stay (residence) was the key factor.

3. Applicability of principles of statutory interpretation to exemption notifications:

The court applied established principles of statutory interpretation, noting that exemption notifications should be interpreted strictly, and any ambiguity should be resolved in favor of the revenue. However, in this case, the court found no ambiguity in the exemption notification. The court referred to precedents, including the Supreme Court's rulings in 'Dilip Kumar and Company' and 'State of Maharashtra vs. Shri Vile Parle Kelvani Mandal,' which emphasized that words not defined in the statute should be understood in their popular sense.

The court also dismissed the relevance of the petitioner's registration as a commercial establishment and the trade license issued by the BBMP, stating that these factors were irrelevant for determining eligibility under the exemption notification.

Conclusion:

The court quashed the AAAR Karnataka's order and held that leasing residential premises as hostels to students and working professionals is covered under Entry 13 of Notification No. 9/2017, entitling the petitioner to GST exemption. The writ petition was allowed, granting the petitioner the benefit of the exemption notification.

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