The State Of Karnataka & Anr. vs. Taghar Vasudeva Ambrish & Anr.

Held

The Supreme Court held that the services provided by the respondent were eligible for exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate). The Court emphasized a purposive interpretation of the exemption notification, stating that the legislative intent was to exempt properties used for residence from GST, irrespective of whether the lessee directly occupied it or subleased it for residential purposes. The Court found that the property was indeed a 'residential dwelling' and its ultimate use remained for residence by students and working women. The Court rejected the revenue's attempt to give retrospective effect to amendments made in 2022 and 2023, which restricted the exemption in certain cases involving registered persons. The Court reasoned that the exemption under Entry 13 was activity-specific, not person-specific, and the conditions for exemption were met for the period in question. Therefore, the High Court's judgment was upheld.

Facts

The respondent, Taghar Vasudeva Ambrish, a co-owner of a residential property with 42 rooms, leased it to a lessee who subsequently subleased it as a hostel for students and working professionals. The respondent sought an advance ruling on his eligibility for GST exemption on the rent received. The Authority for Advance Ruling and the Appellate Authority held that the services did not fall under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate), denying the exemption. The High Court of Karnataka, however, set aside these orders. The State of Karnataka and another authority appealed this decision to the Supreme Court.

Key Issues

1. Whether the services provided by the respondent, in the form of leasing residential premises as a hostel to students and working professionals, fall within the ambit of Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017, thereby entitling the respondent to GST exemption on renting of residential dwelling for use as a residence? Petitioner's arguments (State of Karnataka): The revenue contended that the property was not used by the lessee as their own residence but was subleased, thus not qualifying for the exemption. They implicitly argued for a strict interpretation of the notification, focusing on the direct use by the lessee. Respondent's arguments (Taghar Vasudeva Ambrish): The respondent argued that the property was a 'residential dwelling' and was ultimately used for 'residence' by students and working professionals. They relied on the principle of purposive interpretation to ensure the legislative intent of exempting residential use from GST was upheld, regardless of intermediate lessees. They also argued against retrospective application of subsequent amendments.