Important Article - From Taxation to Empowerment: Examining the Legal Landscape for Women`s Hostels Under GST Exemption in Mookambikaa Ladies Hostel V. Union of India and Ors. Along the Horizon of Women Empowernment by Dr B Ramaswamy

EXEMPTION NOTIFICATION NO. 12/2017 – CENTRAL TAX RATE BY THE CENTRAL GOVERNMENT, EXEMPTION NOTIFICATION NO. 9/2017 – INTEGRATED TAX RATE BY THE CENTRAL GOVERNMENT, SIMILAR NOTIFICATION ISSUED UNDER THE TNGST ACT

Entry No. 13 of the Exemption Notification No.12/2017 – Central Tax Rate dated 28.06.2017 was disputed in the present case. The legal contention in this matter concerned the interpretation of Goods and Services Tax (GST) exemption notices and their application to private ladies’s hostels that provide residential lodging and food to college students and working women. The petitioners maintained that their services are free from GST, whilst the respondents argued that the petitioners must register for GST if their aggregate revenue exceeds a particular level and that the sale of hostel accommodation services is taxable.

Entry No. 13 of the Exemption Notification No.12/2017 – Central Tax Rate dated 28.06.2017 provides for the services by way of renting of residential dwelling for use as residence.

Explanation – For the purpose of exemption under this entry shall cover services by way of renting of residential dwelling to a registered person where the registration person is Proprietor of a Proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence and to such renting is on his own account and not that of the proprietorship concern.

SCOPE OF EXEMPTION NOTIFICATION NO.12/2017 – CENTRAL TAX RATE

1. Power of Central Government under section 11(1) of CGST Act 2017

• 11. Power to grant Exemption. — (1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

 2. Necessity of Public Interest

• the necessity of public interest in law underscores its foundational role in promoting justice, equity, and the common good within society

3. Recommendations by the Goods and Service Tax Council established under Article 279A of the Constitution of India

• Article 279A. Goods and Services Tax Council. — (1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council.

(2) The Goods and Services Tax Council shall consist of the following members, namely: — (a) the Union Finance Minister — Chairperson; (b) the Union Minister of State in charge of Revenue or Finance — Member; (c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government — Members.

(3) The Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide.

(4) The Goods and Services Tax Council shall make recommendations to the Union and the States on— (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax; (b) the goods and services that may be subjected to, or exempted from, the goods and services tax; (c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269A and the principles that govern the place of supply; (d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax; (e) the rates including floor rates with bands of goods and services tax ; (f) any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; (g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and (h) any other matter relating to the goods and services tax, as the Council may decide.

(5) The Goods and Services Tax Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.

(6) While discharging the functions conferred by this article, the Goods and Services Tax Council shall be guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services.

(7) One-half of the total number of Members of the Goods and Services Tax Council shall constitute the quorum at its meetings.

(8) The Goods and Services Tax Council shall determine the procedure in the performance of its functions.

(9) Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely: — (a) the vote of the Central Government shall have a weightage of one-third of the total votes cast, and (b) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

(10) No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of— (a) any vacancy in, or any defect in, the constitution of the Council; or (b) any defect in the appointment of a person as a Member of the Council; or (c) any procedural irregularity of the Council not affecting the merits of the case.

(11) The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute—(a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side and one or more other States on the other side; or (c) between two or more States, arising out of the recommendations of the Council or implementation thereof.

4. Exemption of the Intra-State facilities provided in the Notification from the central tax leviable under section 9(1) of the CGST Act 2017

• Section 9 - Levy and collection.— (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.

(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.

(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:

Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

ARGUMENTS BY THE PETITITONERS AND RELEVANT CITATIONS:

• Services being provided by the Petitioners fall under the exemption – residential accommodation provided to girl students and working women to be termed as residential dwelling

Taghar Vasudeva Ambish v. Appellate Authority for Advance Ruling [2022] 45 TAXLOK.COM 042 (Karnataka), ILR 2022 Kar 3285 (Kant)- The service provided by the petitioner i.e. leasing out residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No. 9 of 2017 dated 28-09-2017 namely `Services by way of renting of residential dwelling for use as residence` issued under the Act. The petitioner is held entitled to benefit of exemption notification. (Para 17)

• Mere availability of alternative remedy does not embargo to entertain the Writ Petition – remedy u/s 100 of TNGST Act

Filterco and Ors v. Commissioner of Sales Tax, MP and Ors AIR 1986 SC 626- “11. We are of opinion that the High Court should have examined the merits of the case instead of dismissing the Writ Petition in limine in the manner it has done. The order passed by the Commissioner of Sales Tax was clearly binding of the assessing authority under Section 42B(2) and although technically it would have been open to the appellants to urge their contentions before the appellate authority namely, the Appellate Assistant Commissioner, that would be a mere exercise in futility when a superior officer namely, the Commissioner, has already passed a well considered order in the exercise of his statutory jurisdiction under sub- section (1) of Section 42-B of the Act holding that 21 varieties of the compressed woollen felt manufactured by the appellants are not eligible for exemption under Entry 6 of Schedule I of the Act. Further Section 38(3) of the Act requires that a substantial portion of the tax has to be deposited before an appeal or revision can be filed. In such circumstances we consider that the High Court ought to have considered and pronounced upon the merits of the contentions raised by the parties and the summary dismissal of the Writ Petition was not justified. In such a situation, although we would have, ordinarily, set aside the judgement of the High Court and remitted the case to that Court for fresh disposal, we consider that in the present case it would be in the interests of both sides to have the matter finally decided by this Court at the present stage itself especially since we have had the benefit of elaborate and learned arguments addressed by the counsel appearing on both sides."

• s 2(e) of TN Hostels and Home for Women and Children (Regulation) Act 2014 provides for definition of hostel or lodging house

"hostel" or "lodging house" means a building in which accommodation is provided for women or children or both, either with boarding or not”

Delhi High Court in “V.L.Kashyap versus R.P.Puri” rendered in Civil Revision Appeal Nos.322. 326, etc., vide order dated 22.09.1976 - “25. The rule of law deducible from the aforesaid decisions is that the work `dwelling house` is synonymous with residential accommodation as distinct from a house of business, warehouse, office, shop, commercial or business premises. The word `house` means a building. It would include the out-houses, courtyard, orchard, garden etc. which are part of the same house, but it cannot include a distinct separate house.”

United Kingdom House of Lords in “Uratemp Ventures Limited versus Collins” reported in (2001) 3 WLR 806 - the term `dwelling house` has been interpreted to mean even a single room as part of a house.

High Court of Bombaby in “Bandu Ravji Nikam versus AcharyaratnaShikshanPrasark Mandal” (W.P.No.4194/1989, dated 12.09.2002) - "10. ... Undoubtedly, "hostel" is nothing but a house of residence or lodging for students. Just because the respondent may charge some amount from the students for providing that facility, may not necessarily mean that it is a commercial or non residential user. Further, there is perceptible difference between "hotel or lodging house" and `student hostel`, though in both cases accommodation may be provided on monetary consideration. In the latter, the occupant cannot claim to be a "tenant" or a "licensee" nor can he claim protection of the provisions of the Bombay Rent Act. Whereas, in the case of the former, part III of the Act would apply. Besides, it will be useful to notice the observations of this Court in para 20 of the decision in the case of Kishinchand (supra). This court has held that the word "residence" may receive a liberal meaning, for a man`s residence is very often the place where he sleeps at night. This court in the said case adverted to the decision of the Privy Council (AIR 1937 PC 46), wherein it is observed that "there is no reason for assuming that it contemplates only permanent residence and excludes temporary residence". Reference is also made to wherein it is observed that, "Residence only connotes that a person eats, drinks and sleeps at that place and that it is not necessary that he should own it".

 Karnataka High Court in “Taghar Vasudeva Ambrish versus Appellate Authority for Advanced Rulings, Karnataka and Others” (W.P.No.14981/2020, dated 7.2.2022) [2022] 45 TAXLOK.COM 042 (Karnataka) - “Thus, it is evident that the expression `residence and `dwelling` have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression `residential dwelling` as it cannot be held that the same does not include hostel which used for residential purposes by students or working women”.

• rendering of residential accommodation and food services falls under the ambit of supplies as provided u/s 7 of TNGST/CGST Act

7. Scope of supply.— (1) For the purposes of this Act, the expression "supply" includes–– (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business;and (c) the activities specified in Schedule I, made or agreed to be made without aconsideration;.

[(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.]

(2) Notwithstanding anything contained in sub-section (1),–– (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of [sub-sections (1), (1A) and (2)] 16 , the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as— (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.

ARGUMENTS BY THE RESPONDENTS AND RELEVANT CITATIONS:

• Remedy u/s 100 of TNGST Act already available which should have been utilised 

100. Appeal to Appellate Authority.— (1) The concerned officer, the jurisdictional officer or an applicant aggrieved by any advance ruling pronounced under sub-section (4) of section 98, may appeal to the Appellate Authority.

(2) Every appeal under this section shall be filed within a period of thirty days from the date on which the ruling sought to be appealed against is communicated to the concerned officer, the jurisdictional officer and the applicant: Provided that the Appellate Authority may, if it is satisfied that the appellant was prevented by a sufficient cause from presenting the appeal within the said period of thirty days, allow it to be presented within a further period not exceeding thirty days.

(3) Every appeal under this section shall be in such form, accompanied by such fee and verified in such manner as may be prescribed.

• Appeal pending before the Hon’ble Apex Court regarding the order passed by the Karnataka High Court in Taghar Vasudeva Ambrish vs. Appellate Authority for Advance Ruling so Respondent 2 can take his own view on the matter

Assistant Commissioner of State Tax and Others, vs. Commercial Steel Ltd., [2021] 40 TAXLOK.COM 005 (SC), 2021 SCC OnLine SC 884, Anmol Industries Ltd., vs. West Bengal Authority for Advance Ruling, Goods and Services Tax [2023] 59 TAXLOK.COM 086 (Calcutta), Jotun India Pvt. Ltd., vs. Union of India and others reported in [2022] 55 TAXLOK.COM 086 (Bombay), (2023) 109 GSTR 191 (Bom.), Columbia Sportswear Company vs. Director of Income Tax, Bangalore reported in [2012] 133 TAXLOK.COM (IT) 153 (SC), (2012) 11 SCC 224

DECISION OF THE HIGH COURT OF JUDICATURE OF MADRAS

The High Court of Madras pronounced the judgment in consonance with the socio and economic welfare principle of the CGST ACT along with the disputed Exemption Notification. The Hostel Batch matter included a disagreement between private ladies hostels and the government over the use of GST exemption notifications for their services. The petitioners, who ran private female hostels that provided residential lodging and meals to college students and working women, contended that their services were eligible for GST exemption under Entry No.12 of Exemption Notification No.12/2017-Central Tax (Rate) dated June 28, 2017. They claimed that the fees collected from inmates for such accommodations were free from GST.

However, the Tamil Nadu State Appellate Authority for Advance Ruling decided that the petitioners` services were not eligible for exemption under the aforementioned announcement. The authority determined that the petitioners were required to register for GST if their total turnover surpassed a specified threshold, and that the supply of hostel housing services was taxed at 9% CGST + 9% SGST under specific notifications.

The judgement emphasised the significance of adhering to earlier rulings and instructions issued by higher authorities. It emphasised the need for private ladies hostels to comply with GST legislation and registration requirements based on their turnover.

The High Court highlighted the socio-welfare nature and stated that the exemption granted is applicable for all kinds of people, rich or poor alike. The High Court allowed the writ petitions which paved way for the aggrieved women being granted exemption under the Notification, acting as a strong gesture of women empowerment. The High Court also highlighted the fact that it is not the intention of the State to demand statutory tax from people who cannot afford to do so and in the interest of the public at large, it was for the same reason that the Exemption Notification had been passed under the Central Tax Rate.

CONCLUSION:

Overall, the High Court`s decision in this case clarified the tax implications for private ladies hostels under the GST regime, emphasizing compliance with tax laws, registration requirements, and the significance of following legal precedents in making rulings and also set an example of how the primary intention of State is to provide for welfare of its citizens by allowing the Writ Petitions and granting the petitioners exemption.

This landmark decision can act as a catalyst for ensuring growth of women by providing them with affordable residential dwelling in the form of hostels as was done in this case. Women wanting to start new career opportunities but are not well-off financially can avail benefits under the exemption – people can start renting out hostel dwellings for the same purpose and by doing so, the law ensures that services by way of renting of residential dwelling for use as residence is exempted till NIL% as was pronounced in the present case.

Governmental schemes such as PMKVY (Pradhan Mantri Kaushal Vikaas Yojna), other ventures and efforts such as MKY (MahilaKoir Yojna), Mudra Yojna, Working Women Hostels, Stree Shakti have been enacted with the sole purpose of providing women various sorts of social securities that are needed in the present world. The State has been functioning exhaustively to ensure the presence of PPs – protection and promotion of women. Various deductions provided for women in the Income Tax Act is another leading example of the multiple policies being enacted by the State. It is safe to say that the State and the judicial system of our country have been able to achieve the goals laid down in the Preamble to the Indian Constitution with effective functioning in collaboration with each other – Justice, social, economic and political and Equality of status and opportunity.