Renting of residential dwelling not for use in course or furtherance of business would be exempt under GST

 

Facts: The Petitioner filed the writ petition before the Hon’ble High Court challenging Clause (A)(b) of the Notification No.04/2022-Central Tax (Rate) dated 13th July, 2022, as unsustainable being ultra vires Article 14 of the Constitution of India and also beyond the powers conferred under the Goods And Services Tax Act, 2017 (GST).

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that by way of impugned notification dated 13th July, 2022, the exemption granted by a previous Notification dated 28th July, 2017 for renting of residential accommodation is no longer available to tenants who are registered under GST.
• It was submitted that the amendment is affecting those who are doing their business as a proprietary concern, like the Petitioner.
• Further the denial of exemption solely on the basis that the tenant is registered under GST is not based upon any intelligible differentia and the said differentia has no rational relation to the object sought to be achieved.

Submissions on the behalf of the respondents: –

• It was submitted on the behalf of the respondents that renting of residential dwelling to business is taxable and the existing exemption of renting of residential dwelling to non-business is still continuing.
• It was submitted that where the residential dwelling is rented by a person who is the proprietor of a proprietorship firm in his personal capacity for use as his own residential dwelling, and such renting is not on account of its business i.e., not accounted for in the firms account but is on personal account, the exemption shall continue to be available to him.
• That a proposal to amend Notification No.04/2022 – Central Tax (Rate) to bring in greater clarity regarding taxability of registered persons, is being examined to be placed before the GST Council, as the Notification No.04/2022-Central Tax (Rate) dated 13.07.2022 does not specify that GST would be charged only where the registered person has rented (taken on rent) residential dwelling in course or furtherance of business, it is reiterated for clarity ‘that renting of a residential dwelling to a proprietor of a registered proprietorship firm who rents it in his personal capacity for use as his own residence and not for use in the course or furtherance of business of his proprietorship firm and such renting is on his own account and not that of the proprietorship firm, shall be exempt from tax under Notification No.04/2022-Central Tax (Rate) dated 13.07.2022.’
• The said clarification would be binding on the respondents.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case, held that the aforesaid clarification that renting of a residential dwelling by a proprietor of a registered proprietorship firm, who rents it in his/her own personal capacity for use as his/her own residence as well as not for use in the course or furtherance of business of his/her proprietorship firm and such renting is on his/her own account and not that of proprietorship firm shall be exempt from GST, is accepted by this Court and all the respondents are held bound by the same.

The Hon’ble Court with the above findings, disposed of the writ petition along with the application.

To read the complete judgment 2022 Taxo.online 1020