Is GST Exempt on Leasing Out Building For Hostel Accommodation?

The term “residential dwelling” is not defined either in the statute or in the delegated legislation. Hence, it should be interpreted as per common trade parlance. A hostel is generally understood as an establishment providing accommodation to students, workers and the like. On the other hand, residential dwelling is where people reside and is treated as home. If the building was constructed / leased with the intent of providing hostel accommodation, it is akin to sociable accommodation compared to what is commonly understood as residential accommodation. Hence, the said property is not a residential dwelling within the meaning of exemption entry.

It is generally argued that students reside in the accommodation for about three to twelve months, consequent to which there is a certain degree of permanence in the stay to be termed as residence. However, the dwelling should be used as residence to attract the exemption entry. That is, the term “for use as residence” implies the service recipient should use the dwelling as residence. However, the lessee (recipient) uses the said property for running its business of paying guest accommodation.