Rent From Leasing Out Residential Premises Wouldn’t Be Exigible To GST: Karnataka HC Directs Dept. To Reconsider Refund Application

The Karnataka High Court while directing the Goods and Service Tax (GST) department to reconsider the refund application held that the rent received by leasing out residential premises for students, staff, and teachers would not be eligible for GST. The bench of Justice S.R.Krishna Kumar has quashed an appellate order denying GST refund on rental income and directed the tax department to reconsider the assessee’s refund application afresh. The controversy dates back to August 2, 2022, when the Local GST Office (LGSTO) initiated an audit under Section 65(6) of the GST Act, 2017. During the audit, the department included the rent received by the petitioner from the “schedule property” leased to Bhandary Foundation, which used the premises to house students, teachers, and staff. On September 9, 2020, the Gram Panchayat had already certified the premises as a residential dwelling. Despite this, the audit included rent receipts as taxable, prompting the petitioner to submit a response on August 17, 2022, asserting that rent from residential dwelling is exempt from GST under Entry 13 of Notification 9/2017 (IGST Exemption Notification). The matter became more complex due to contradictory audit findings. The audit officer initially agreed that the premises were residential and that rent received was exempt. The petitioner filed a refund claim for ₹62,50,716, paid earlier under protest. The same office revised the audit report, this time stating that the refund was not admissible and the payment was correct. Despite objections filed by the petitioner, refund applications were rejected by orders dated 10.11.2022 and 17.12.2022. Appeals were filed, but the department once again issued a revised audit report on 25.01.2023, reiterating its earlier stand. The department issued an endorsement denying the maintainability of appeal, and later the Joint Commissioner dismissed the petitioner’s appeal through the impugned order dated 10.01.2024. The High Court relied extensively on the Karnataka High Court Division Bench judgment in Taghar Vasudeva Ambrish vs. AAAR, Karnataka (ILR 2022 KAR 3285). That ruling clearly held that renting of residential dwellings for use as residence—including hostels for students and working professionals—is exempt from GST. The exemption does not require the lessee to use the premises personally as residence. Hostel accommodation is not akin to commercial lodging facilities such as hotels or guest houses. The court held that rental income received by the petitioner from a residential dwelling used to accommodate students, teachers, and staff cannot be taxed under GST. The Joint Commissioner’s order rejecting the refund was unsustainable. The High Court quashed the Impugned order and directed that the department must reconsider the refund application dated 26.09.2022 strictly in line with principles laid down in Taghar Vasudeva Ambrish. Case Details Case Title: Bhandary Gas Agency Versus Joint Commissioner Of Commercial Taxes Case No.: 05/11/2025 Date: 05/11/2025 Counsel For Petitioner: Krishika Vaishnav Counsel For Respondent: K. Hema Kumar Click Here To Read Order Read More: Active Role In Creation Of Bogus Firms, Clandestine Clearance Of Goods: Rajasthan HC Denies Bail in Multi-Crore GST Fraud Case

Ask Jurishour AI

Rent From Leasing Out Residential Premises Wouldn’t Be Exigible To GST: Karnataka HC Directs Dept. To Reconsider Refund Application

Membership Required

Latest articles

GST Recovery | No Money to Be Taken From Bank Account While Court Examines Alleged Identity Document Misuse: Madras HC

GST Demand Over Alleged RCM Short Payment Stayed After Steel Trader Shows Sales Records: Madras HC

Can an Approved GST Refund Be Recovered as “Erroneous”? Madras HC Stays Demand Orders Pending Examination

GST Refund Can’t Be Cut by ITC Reversal Linked to Earlier Periods: GSTAT Upholds Cess Refund

More like this

GST Recovery | No Money to Be Taken From Bank Account While Court Examines Alleged Identity Document Misuse: Madras HC

GST Demand Over Alleged RCM Short Payment Stayed After Steel Trader Shows Sales Records: Madras HC

Can an Approved GST Refund Be Recovered as “Erroneous”? Madras HC Stays Demand Orders Pending Examination

About us

Company

Categories

JurisHour AI Assistant