Chennai: Pointing out that rentals attract GST only if the rented building is used for commercial purposes,
Madras high court
has quashed GST demand on hostels for working women and girls.
Justice Krishnan Ramaswamy, setting aside the GST demand notice, said: “While adverting to the imposition of GST on
hostel accommodation
, it has to be looked into as to whether the inmates of the hostel rooms are using the premises as their residential dwelling or commercial purpose since renting of residential unit attracts GST only when it is rented for commercial purpose.” Since the end-use of the property is for residential purposes, it would not attract GST, he ruled.
“So, in order to claim exemption of GST, the nature of the end-use should be residential and it cannot be decided by the nature of the property or the nature of the business of the service provider, but by the purpose for which it is used,” Justice Krishnan Ramaswamy added.
Therefore, this court is of the considered view that the issue of levy of GST on
residential accommodation
should be viewed from the perspective of the recipient of service and not from the perspective of service provider, who offers the premises on rental basis, the judge said.
The court passed the order while allowing a batch of pleas moved by managements of private hostels for working women and girls challenging an order passed by TN State Appellate Authority for Advance Ruling dated Aug 31, 2023, imposing 18% GST on such hostels. “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,” the court said.