Integrated Goods and Services Tax Act, 2017 – Entry 13 of the Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 – GST exemption on renting of residential dwelling for use as a residence under Entry 13 – Entitlement – Respondent No.1 co-owner of a residential property consisting of 42 rooms along with other co-owners executed lease deed in favour of one-lessee who in turn leased out the residential property as hostel to provide long term accommodation to students and working professionals – Respondent No.1 filed Advance Ruling application as regards to his eligibility to claim exemption on the rent received by him from the lessee by letting the property – Authority for Advance Ruling held that the services provided by the respondent no.1 in the form of leasing of residential premises as hostel to students and working professionals do not fall within the ambit of Entry 13 of the Notification, thus, the respondent No.1 not entitled to the exemption on renting of residential dwelling for use as residence under Entry 13 – Upheld by the Appellate Authority, however, set aside by the High Court – Interference: Held: Not called for – As per the Khatha Extract and layout plans and records available, the plot and property is shown as residential in nature, thus, the subject property a “residential dwelling – Entry 13 grants exemption from GST for renting of residential dwellings for use as residence – Property was taken on rent only for use as a residence – On a strict construction thereof, all the three requirements satisfied – Once the exemption notification is applicable, it should be construed liberally – Thus, if the conditions are satisfied, the benefit should be available to both lessees and the sub-lessees as well – It cannot be said that since lessee did not use the hostel as a residence but rather sub-leased the same to students/working women, such transaction does not fall within Entry 13 – Entry 13 of the Notification does not mandate that the lessee must use the residential dwelling as its own residence – Giving Entry 13 a narrow interpretation by holding that it is available only when the property so rented is used by service recipient themselves would ultimately lead to the legislative intent being defeated – Legislative intent behind this exemption clause is that a rented property that is used as residence should not suffer 18% GST or IGST – On facts, the ultimate use of the property as residence remains unchanged – It remained as ‘use for residence’ by students/working women – Exemption envisaged under Entry 13 is an activity specific exemption and not person specific exemption – Entry 13 was amended w.e.f. 18.07.2022, and in view thereof, no exemption available for respondent 1, as he has rented to a registered person – Through these appeals, the revenue is, in effect, trying to give retrospective application to the amendment made in 2022, which is impermissible – Explanation added to Entry 13 w.e.f. 01.01.2023 clearly shows that even if the rent is paid by a registered person, the exemption will be available if it is used for the purpose of own residence and is rented in the personal capacity – Thus, the intention from the beginning was to ensure that rental agreements for use of the property for residential purposes are granted exemption from GST. [Paras 48-53, 55, 61-63, 65-69]
Words and phrases – Term “residential dwelling” – Meaning of: Held: In common parlance, ‘residential dwelling’ means any building, structure, or part of the building or structure other than offices or factories, that is used or intended to be used as a home, residence, or sleeping place by one person or by two or more persons maintaining a common household, to the exclusion of all others – Thus, any residential accommodation meant for long term stay can be referred to as “residential dwelling”. [Paras 46, 47] Interpretation of statutes – ‘Purposive interpretation’ or ‘purposive construction’ – Principle of:
Held: Principle of ‘purposive interpretation’ or ‘purposive construction’ is based on the understanding that the Court is supposed to attach that meaning to the provisions which serve the ‘purpose’ behind such a provision – Basic approach is to ascertain what is it designed to accomplish – By interpretative process the Court is supposed to realise the goal that the legal text is designed to realise – Of the three components, namely, language, purpose and discretion ‘of the Court’, insofar as purposive component is concerned, this is the ratio juris, the purpose at the core of the text – This purpose is the values, goals, interests, policies and aims that the text is designed to actualize – It is the function that the text is designed to fulfil – Statutory interpretation of a provision is never static but is always dynamic – Though literal rule of interpretation, till some time ago, was treated as the ‘golden rule’, now the doctrine of ‘purposive interpretation’ is predominant, particularly in those cases where literal interpretation may not serve the purpose or may lead to absurdity. [Paras 58-60]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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