Residential property leased for operating the business of paying guest accommodation is not exempt under GST :Karnataka AAAR
Forum: Karnataka AAAR
The Appellant along with four joint owners collectively leased out a multi-storied property in Bangalore. The Lessee obtained the property on lease for the purpose of sub-leases/sub-licences such residential premises to individuals (including students) for the purpose of long-stay accommodation.
The Karnataka AAR ruled that lease services do not fall under the exemption “Services by way of renting of residential dwelling for use as residence” as listed in entry 13 of Notification No.9/2017- Integrated Tax (Rate) dated. 28th June, 2017.
Aggrieved by the AAR ruling, the Appellant filed an appeal before the AAAR
The AAAR in it’s finding held that the Lessee uses the said property for conducting his business of running a paying guest accommodation. The exemption is available only if the residential dwelling is used as a residence by the person who has taken the same on rent/lease.
The term “for use as residence” as appearing in Entry.No 13 of Notification No 09/2017 IT (R) implies that the recipient of service should use the dwelling as residence. In the instant case, the Lessee who is the recipient of the service of renting provided by the Appellant, is not using the leased property for use as residence but is using the same for operating the business of providing paying guest accommodation to students. On this ground it was found that the Appellant is not eligible for the benefit of exemption as per Entry.No 13 of Notification No 09/2017 IT (R) dt 28.06.2017.
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