Long-Term Hostel Sub-Letting Still Qualifies as Residential Dwelling Eligible for GST Exemption

Case Details: State of Karnataka vs. Taghar Vasudeva Ambrish - [2025] 181 taxmann.com 199 (SC)

Judiciary and Counsel Details

J..B. Pardiwala & K.V. Viswanathan, JJ.

Facts of the Case

The assessee, a co-owner of a residential building, leased the property to a company, which sublet rooms as hostels for long-term stays of 3 to 12 months to students and working professionals. The Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) denied the exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate), on the ground that the company did not itself reside in the property. It was contended that the property continued to qualify as a residential dwelling since the sub-lessees’ use satisfied the ‘use as residence’ condition, and that the amendment to the notification, which excluded registered persons from the exemption, was prospective and could not be applied retrospectively. The matter was accordingly placed before the Supreme Court.

Supreme Court Held

The Supreme Court held that the property qualified as a residential dwelling since the accommodation was for long-term stays and municipal records confirmed its residential character. It was observed that the condition of ‘use as residence’ under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) was satisfied through the sub-lessees, making the exemption activity-specific rather than person-specific. The Court further held that retrospective denial of exemption under the amended notification was impermissible, and that all conditions for exemption during 2019-2022 were met. Accordingly, the appeals filed by the Department of Revenue were dismissed in favour of the assessee.

List of Cases Reviewed

Union of India v. Wood Papers Ltd. 1991 taxmann.com 77 (SC)/(1990) 4 SCC 256 (para 55) followed
Order of High Court of Karnataka in Writ Petition No. 14891 of 2020 judgment and order dated 07.02.2022 (para 69) affirmed

List of Cases Referred to

Bandu Ravji Nikam v. Acharyaratna Deshbushan Shikshan Prasark Mandal [W.P. No.4194 of 1989, dated 12-9-2002] (para 11)
Kishore Chandra Singh Deo v. Babu Ganesh Prasad Bhagat AIR 1954 SC 316 (para 11)
Mohinder Singh v. State of Haryana AIR 1989 SC 1367 (para 12)
CCE v. Allied Air-Conditioning Corpn. 2006 taxmann.com 753 (SC) (para 12)
Government of Kerala v. Mother Superior Adoration Convent [2021] 126 taxmann.com 68 (SC) (para 22)
V.L. Kashyap v. R.P. Puri (1976) 12 DLT 369 (para 41)
Uratemp Ventures Limited v. Collins (2001) 3 WLR 806 (para 42)
Union of India v. Wood Papers Ltd. 1991 taxmann.com 77 (SC) (para 55)
CCE v. Parle Exports (P) Ltd. 1991 taxmann.com 77 (SC) (para 57)
Shailesh Dhairyavan v. Mohan Balkrihna Lulla (2016) 3 SCC 619 (para 60).