Madras High Court Quashes GST Demand on Hostels for Working Women and Girls
The Madras High Court has recently made a significant ruling regarding the imposition of GST on hostel accommodation. In a landmark judgment, Justice Krishnan Ramaswamy emphasized that rentals attract GST only if the rented building is used for commercial purposes. The court’s decision to quash the GST demand notice on hostels for working women and girls has brought clarity on the issue.
According to Justice Krishnan Ramaswamy, the key factor in determining the applicability of GST on hostel accommodation is whether the inmates use the premises for residential dwelling or commercial purpose. The ruling highlights that renting a residential unit attracts GST only when it is rented for commercial purposes. Therefore, if the end-use of the property is for residential purposes, it would not attract GST, as per the court’s ruling.
The judgment further underscores that to claim exemption from GST, the nature of the end-use should be residential. Importantly, it clarifies that the determination should be based on the purpose for which the property is used, rather than the nature of the property or the business of the service provider. Justice Krishnan Ramaswamy added that the issue of levy of GST on residential accommodation should be viewed from the perspective of the recipient of the service, not from the perspective of the service provider offering the premises on a rental basis.
The Madras High Court’s decision came in response to a batch of pleas filed by managements of private hostels for working women and girls. The pleas challenged the order passed by the TN State Appellate Authority for Advance Ruling, which had imposed 18% GST on such hostels. The court’s ruling emphasizes that the imposition of GST on hostel accommodation should be considered from the viewpoint of the recipient of the service, debunking the misconception that GST would be imposed on the revenue of the service provider.
The judgment clarifies that the imposition of GST is only on the recipient of the service, and it will be collected from the recipient, not the service provider. This pivotal ruling brings much-needed clarity and sets a precedent for the treatment of GST on residential accommodations provided by hostels for working women and girls.
In conclusion, the Madras High Court’s ruling not only quashed the GST demand on hostels for working women and girls but also provided crucial guidelines on the application of GST in such cases. This decision is poised to have a significant impact and provide clarity for similar situations in the future.