SC rules that renting residential premises for student hostel use is exempt from GST

NEW DELHI: The Supreme Court on Thursday ruled that leasing a residential property to an organisation that uses it as a hostel for students and working professionals is exempt from GST.

A bench comprising Justices JB Pardiwala and KV Viswanathan upheld the Karnataka High Court’s judgment, which had earlier held that renting a residential premises to an entity running a hostel for students and professionals qualifies for GST exemption.

The bench noted that the end-use of the property remains residential, and imposing 18% GST on the lease agreement between the property owners and M/s DTwelve Spaces Private Limited would ultimately burden students and working professionals. This, the court said, would defeat the legislative intent behind granting exemption for residential use.

The case involved a co-owner of a residential property with 42 rooms in Bengaluru. The owners had leased the property to M/s D Twelve Spaces Private Limited, which then operated it as a long-term hostel, with stays ranging from 3 to 12 months.

Seeking clarity on whether the leasing service qualified for GST exemption, the petitioner approached the Karnataka Authority for Advance Ruling (AAR). The AAR held that renting a residential dwelling for use as a residence did not fall under the exemption entry.

On appeal, the Appellate Authority for Advance Ruling (AAAR) maintained that a hostel is not a residential dwelling and denied the exemption.

However, the Karnataka High Court disagreed and ruled that leasing a residential property for use as a hostel for students and professionals is indeed exempt from GST—a view now affirmed by the Supreme Court.