Seema Gupta vs. Union Of INDIA & Ors.

Held

The Court accepted the clarification provided by the respondents in their supplementary affidavit. The clarification stated that renting of a residential dwelling by a proprietor of a registered proprietorship firm, who rents it in their personal capacity for their own residence and not for use in the course or furtherance of business of their proprietorship firm, and where such renting is on their own account and not that of the proprietorship firm, shall be exempt from GST under Notification No.04/2022-Central Tax (Rate) dated July 13, 2022. The Court held that all respondents are bound by this clarification. Consequently, no further orders were deemed necessary in the writ petition. The issue of whether the notification was ultra vires Article 14 or beyond the GST Act's powers was implicitly resolved by this clarification, which effectively narrowed the scope of the notification to align with the petitioner's concerns regarding personal use versus business use. The Court did not expressly decide the ultra vires question but disposed of the petition based on the accepted clarification.

Facts

The petitioner, Seema Gupta, challenged Clause (A)(b) of Notification No.04/2022-Central Tax (Rate) dated July 13, 2022, arguing it was ultra vires Article 14 of the Constitution and beyond the powers granted by the GST Act, 2017. The impugned notification removed the exemption for renting residential accommodation previously available under a July 28, 2017 notification, specifically for tenants registered under GST. The petitioner, a proprietor of a business, contended this denial of exemption solely based on GST registration lacked intelligible differentia and a rational relation to the object sought. The respondents, including the Union of India and GST authorities, argued in their counter affidavit that renting dwelling to businesses merited GST imposition, distinguishing it from renting to non-businesses. They clarified that exemption would continue if a proprietor rented a dwelling in their personal capacity for their own residence, not for business use and not accounted for in business accounts.

Key Issues

1. Whether Clause (A)(b) of Notification No.04/2022-Central Tax (Rate) dated July 13, 2022, is ultra vires Article 14 of the Constitution of India and beyond the powers conferred under the Goods And Services Tax Act, 2017, by denying GST exemption for renting residential accommodation solely on the basis of the tenant being registered under GST? (Question of law) Petitioner's arguments: The petitioner argued that denying the exemption solely because the tenant is registered under GST is discriminatory and violates Article 14 of the Constitution, as there is no intelligible differentia or rational nexus to the object of taxation. The amendment unfairly impacts individuals like proprietorship firm owners who rent residential accommodation for personal use. Revenue's arguments: The respondents argued that the amendment was based on the observation that renting of dwelling to businesses merits imposition of GST, while renting to non-businesses could continue to be exempted. They clarified that if a proprietor rents a residential dwelling in their personal capacity for their own residence, and it is not accounted for in the business entity's accounts, the exemption would still be available. They also stated that the government is bound by the recommendations of the GST Council and that a proposal to amend the notification for greater clarity was being examined.