Court rules leasing residential hostel rooms for commercial purposes taxable under GST

The court ruled that the amount received for leasing residential hostel rooms is not exempt under Sl.No.14 or Sl.No.12 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. The property was leased for commercial purposes to accommodate students in bulk numbers, which did not qualify as a "residential dwelling for use as residence." Therefore, the activity was classified as "Rental or leasing services involving own or leased non-residential property" and was taxable at the rate of 18% IGST.

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Issues Involved:
1. Whether the amount received for leasing residential hostel rooms is exempt under Sl.No.14 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.
2. Whether the amount received for leasing residential hostel rooms is exempt under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.

Issue 1: Exemption under Sl.No.14 (Heading 9963) of Notification No.12/2017-Central Tax (Rate)
The applicant contended that the leasing of hostel rooms should be exempt under Sl.No.14 of Notification No.12/2017-CT (Rate), which pertains to services by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff of a unit of accommodation below one thousand rupees per day.

Upon examination, it was found that the applicant, who is the service provider, does not meet the conditions specified. The applicant is neither registered under any of the categories mentioned (hotel, inn, guest house, club, or campsite) nor providing services to students under his registered trade name with a declared tariff of a unit of accommodation below one thousand rupees per day. Instead, the property is leased to M/s. Nspira Management Services Private Limited, which further sublets it to Narayana Educational Society for accommodating students. Therefore, the exemption under Sl.No.14 does not apply.

Issue 2: Exemption under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate)
The applicant also sought exemption under Sl.No.12 of the same notification, which exempts "Services by way of renting of residential dwelling for use as residence."

The property in question, consisting of 170 hostel rooms with attached bathrooms, is leased to M/s. Nspira Management Services Private Limited for commercial purposes, which in turn subleases it to Narayana Educational Society for student accommodation. The term "residential dwelling" is not defined in the Act, but generally, it refers to a building used as a home or residence by individuals maintaining a household.

In this case, the property is used for commercial purposes to accommodate students in bulk numbers, which does not qualify as a "residential dwelling for use as residence." The temporary stay of students does not meet the criterion of "use as residence." Therefore, the activity is classified as "Rental or leasing services involving own or leased non-residential property" under Service Code (Tariff) 997212 and is taxable at the rate of 18% IGST.

Ruling:
1. The amount received for leasing residential hostel rooms is not exempt under Sl.No.14 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.
2. The amount received for leasing residential hostel rooms is not exempt under Sl.No.12 (Heading 9963) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 as amended up to 25.01.2018.

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