THE STATE OF KARNATAKA v. TAGHAR VASUDEVA AMBRISH

GST Exemption on Residential Dwellings: Hostel Accommodation for Students and Working Professionals Qualifies as "Residential Dwelling" Under Notification 9/2017 Before 2022 Amendment.

Court: Supreme Court of India
Citation: 2025 INSC 1380
Decision Date: 04-12-2025

List of Laws

Goods and Services Tax (GST); Integrated Goods and Services Tax Act, 2017; Notification No. 9/2017- Integrated Tax (Rate); Finance Act, 1994; Central Goods and Services Tax Act, 2017; Interpretation of Statutes; Purposive Interpretation; Exemption Notifications

Case Brief

Facts: The State of Karnataka appealed against a High Court judgment regarding the applicability of GST exemption on renting of residential premises. The respondent, a co-owner of a residential property, leased it to DTwelve Spaces, who then used it as a hostel for students and working professionals. The Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) ruled that the renting did not fall under the exemption of "services by way of renting of residential dwelling for use as residence" under Notification No. 9/2017- Integrated Tax (Rate).
Procedural Posture: The respondent challenged the AAAR's order in the High Court of Karnataka via a writ petition. The High Court allowed the writ petition, setting aside the AAAR's order. The State of Karnataka then appealed to the Supreme Court.
Issue: Does the service of leasing residential premises provided as a hostel to students and working professionals fall under the GST exemption for "services by way of renting of residential dwelling for use as residence" as per Entry 13 of Notification No. 9/2017- Integrated Tax (Rate)? Specifically, does the fact that the lessee (DTwelve Spaces) sub-leases the property for residential use affect the exemption?
Holding: Yes, the Supreme Court upheld the High Court's decision, holding that the renting of residential premises as a hostel to students and working professionals is eligible for the GST exemption under Entry 13 of Notification No. 9/2017, provided the ultimate use of the property remains residential. The appeals by the State of Karnataka were dismissed.
Reasoning: The Court reasoned that the term "residential dwelling" should be interpreted in common parlance, encompassing any residential accommodation meant for long-term stay. It relied on previous judgments and dictionary definitions to support this interpretation. The Court emphasized that the legislative intent behind the exemption was to provide relief for rented properties used for residential purposes. The Court stated that Entry 13 is an activity-specific exemption, not a person-specific one. The Court also noted that the amendment to Entry 13 in 2022, which excluded renting to registered persons from the exemption, was not applicable retrospectively. The Court stated that a literal, formalistic interpretation of the statute should be eschewed, and the object sought to be achieved by the provision should be considered. The Court also stated that once the exemption notification is applicable, it should be construed liberally.