Madras High Court Rules No GST on Women’s Hostels, Citing Non-Commercial End-Use.

The Madras High Court has dismissed a GST demand on hostels for working women and girls, emphasizing that GST is only applicable to rentals if the rented premises are utilized for commercial activities. Justice Krishnan Ramaswamy, in overturning the GST demand notice, remarked that the determination of GST applicability on hostel lodging hinges on whether the occupants utilize the space for residential or commercial purposes, as GST is levied on residential units only when they are rented out for commercial aims. He concluded that since the hostels serve residential purposes, they are exempt from GST.

Justice Ramaswamy further elaborated that for a GST exemption to apply, the crucial factor is the residential nature of the end-use, irrespective of the property’s characteristics or the service provider’s business type; what matters is the intended use of the rented space.

Thus, the judge posited that decisions regarding the GST on residential accommodations should consider the viewpoint of the service recipient, not the service provider who rents out the space.

This judgment was issued in response to appeals from private hostel managements for working women and girls against a verdict by the TN State Appellate Authority for Advance Ruling on August 31, 2023, which had demanded an 18% GST on such accommodations. The court underscored that the matter of imposing GST on hostel accommodations must be assessed from the service recipient’s perspective, not that of the service provider.

Source from: https://www.a2ztaxcorp.com/blogs/660253453360f45bafedc1c8/details