THE STATE OF KARNATAKA & ANR.versusTAGHAR VASUDEVA AMBRISH & ANR.

                [2025] 12 S.C.R. 366 : 2025 INSC 1380

                    The State of Karnataka & Anr.
                                  v.
                   Taghar Vasudeva Ambrish & Anr.
                       (Civil Appeal No. 7846 of 2023)
                              04 December 2025
            [J.B. Pardiwala* and K.V. Viswanathan, JJ.]


                            Issue for Consideration
       Issue arose whether services provided by the respondent no.1 in
       the form of leasing of residential premises as hostel to students
       and working professionals falls within the ambit of Entry 13 of the
       Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017,
       thus, the respondent no.1 entitled to the exemption on services,
       renting of residential dwelling for use as a residence under Entry 13
       of the Notification.

                                   Headnotes†
       Integrated Goods and Services Tax Act, 2017 – Entry 13 of the
       Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 –
       GST exemption on renting of residential dwelling for use
       as a residence under Entry 13 – Entitlement – Respondent
       No.1 co-owner of a residential property consisting of 42
       rooms along with other co-owners executed lease deed in
       favour of one-lessee who in turn leased out the residential
       property as hostel to provide long term accommodation to
       students and working professionals – Respondent No.1 filed
       Advance Ruling application as regards to his eligibility to
       claim exemption on the rent received by him from the lessee
       by letting the property – Authority for Advance Ruling held
       that the services provided by the respondent no.1 in the form
       of leasing of residential premises as hostel to students and
       working professionals do not fall within the ambit of Entry 13
       of the Notification, thus, the respondent No.1 not entitled to
       the exemption on renting of residential dwelling for use as
       residence under Entry 13 – Upheld by the Appellate Authority,
       however, set aside by the High Court – Interference:



* Author
[2025] 12 S.C.R.                                                             367

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


     Held: Not called for – As per the Khatha Extract and layout plans
     and records available, the plot and property is shown as residential
     in nature, thus, the subject property a “residential dwelling –
     Entry 13 grants exemption from GST for renting of residential
     dwellings for use as residence – Property was taken on rent only
     for use as a residence – On a strict construction thereof, all the
     three requirements satisfied – Once the exemption notification is
     applicable, it should be construed liberally – Thus, if the conditions
     are satisfied, the benefit should be available to both lessees and
     the sub-lessees as well – It cannot be said that since lessee
     did not use the hostel as a residence but rather sub-leased the
     same to students/working women, such transaction does not fall
     within Entry 13 – Entry 13 of the Notification does not mandate
     that the lessee must use the residential dwelling as its own
     residence – Giving Entry 13 a narrow interpretation by holding
     that it is available only when the property so rented is used by
     service recipient themselves would ultimately lead to the legislative
     intent being defeated – Legislative intent behind this exemption
     clause is that a rented property that is used as residence should
     not suffer 18% GST or IGST – On facts, the ultimate use of the
     property as residence remains unchanged – It remained as ‘use
     for residence’ by students/working women – Exemption envisaged
     under Entry 13 is an activity specific exemption and not person
     specific exemption – Entry 13 was amended w.e.f. 18.07.2022,
     and in view thereof, no exemption available for respondent 1, as
     he has rented to a registered person – Through these appeals, the
     revenue is, in effect, trying to give retrospective application to the
     amendment made in 2022, which is impermissible – Explanation
     added to Entry 13 w.e.f. 01.01.2023 clearly shows that even if
     the rent is paid by a registered person, the exemption will be
     available if it is used for the purpose of own residence and is
     rented in the personal capacity – Thus, the intention from the
     beginning was to ensure that rental agreements for use of the
     property for residential purposes are granted exemption from GST.
     [Paras 48-53, 55, 61-63, 65-69]

     Words and phrases – Term “residential dwelling” – Meaning of:
     Held: In common parlance, ‘residential dwelling’ means any
     building, structure, or part of the building or structure other than
     offices or factories, that is used or intended to be used as a home,
     residence, or sleeping place by one person or by two or more
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       persons maintaining a common household, to the exclusion of all
       others – Thus, any residential accommodation meant for long term
       stay can be referred to as “residential dwelling”. [Paras 46, 47]

       Interpretation of statutes – ‘Purposive interpretation’ or
       ‘purposive construction’ – Principle of:
       Held: Principle of ‘purposive interpretation’ or ‘purposive
       construction’ is based on the understanding that the Court is
       supposed to attach that meaning to the provisions which serve the
       ‘purpose’ behind such a provision – Basic approach is to ascertain
       what is it designed to accomplish – By interpretative process the
       Court is supposed to realise the goal that the legal text is designed
       to realise – Of the three components, namely, language, purpose
       and discretion ‘of the Court’, insofar as purposive component is
       concerned, this is the ratio juris, the purpose at the core of the
       text – This purpose is the values, goals, interests, policies and aims
       that the text is designed to actualize – It is the function that the text
       is designed to fulfil – Statutory interpretation of a provision is never
       static but is always dynamic – Though literal rule of interpretation,
       till some time ago, was treated as the ‘golden rule’, now the doctrine
       of ‘purposive interpretation’ is predominant, particularly in those
       cases where literal interpretation may not serve the purpose or
       may lead to absurdity. [Paras 58-60]

                                  Case Law Cited
       Kishore Chandra Singh Deo v. Babu Ganesh Prasad Bhagat
       [1954] 1 SCR 919 : AIR 1954 SC 316; Mohinder Singh v. State of
       Haryana [1989] 2 SCR 437 : AIR 1989 SC 1367; Commissioner of
       Central excise, Delhi v. Allied Air Conditioning Corpn. [2006] Supp.
       6 SCR 41 : (2006) 7 SCC 735; Government of Kerala v. Mother
       Superior Adoration Convent [2021] 3 SCR 26 : (2021) 5 SCC
       602; Union of India v. Wood Papers Limited [1990] 2 SCR 659 :
       (1990) 4 SCC 256; Collector of Central Excise v. Parle Exports
       (P) Ltd. [1988] Supp. 3 SCR 933 : (1989) 1 SCC 345; Shailesh
       Dhairyavan v. Mohan Balkrihna Lulla [2015] 12 SCR 70 : (2016)
       3 SCC 619 – referred to.
       Bandu Ravji Nikam v. Acharyaratna Deshbushan Shikshan Prasark
       Mandal, Kolhapur, 2003 (3) Mah L.J. 472; V.L. Kashyap v. R.P.
       Puri, 12 (1976) DLT 369 – referred to.
       Uratemp Ventures Limited v. Collins (2001) 3 WLR 806 – referred to.
[2025] 12 S.C.R.                                                         369

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


                      Books and Periodicals Cited
     Concise Oxford English Dictionary 2013 Edition; Blacks Law
     Dictionary 6th Edition; Purposive Interpretation in Law by Aharam
     Barak – referred to.

                               List of Acts
     Integrated Goods and Services Tax Act, 2017; Kerala Building Tax
     Act, 1975; Karnataka Shops and Commercial Establishment Act,
     1961; Finance Act, 1994.

                            List of Keywords
     Leasing of residential premises as hostel to students and working
     professionals; Notification No. 9/2017-Integrated Tax (Rate) dated
     28.06.2017; Exemption on services; Renting of residential dwelling
     for use as residence; Residential dwelling; Exemption from payment
     of the GST; Authority for Advance Ruling; Khatha Extract; Layout
     plans; Legislative intent; Use for residence by students/working
     women; Purposive interpretation or purposive construction.

                           Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7846 of 2023
     From the Judgment and Order dated 07-02-2022 of the High Court
     of Karnataka at Bengaluru in WP No. 14891 of 2020
     With
     Civil Appeal No. 7847 of 2023

                        Appearances for Parties
     Advs. for the Appellant(s):
     Nishanth Patil, A.A.G., Bhumi Agarwal, Awanish Gupta, Sanchit
     Garga, Arijit Dey, Mukesh Kumar Maroria.
     Advs. for the Respondent(s):
     Arvind P Datar, Sr. Adv., Ms. Surekha Raman, Amarjit Singh Bedi,
     Rahul Unnikrishnan, Shreyash Kumar, Yashwant Sanjenbam,
     Sidharth Nair, Harshit Singh, M/s K J John and Co, V.C. Bharathi,
     Gurmeet Singh Makker, Anmol Chandan, Suyash Pandey, Aditya
     Archiya.
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                  Judgment / Order of the Supreme Court

                                  Judgment

       J.B. Pardiwala, J.

1.     Since the issues raised in both the captioned appeals are the same
       and the challenge is also to the self-same judgment and order passed
       by the High Court of Karnataka, those were taken up for hearing
       analogously and are being disposed of by this common judgment
       and order.
2.     These appeals arise from the judgment and order passed by the
       High Cout of Karnataka dated 07.02.2022 in Writ Petition No. 14891
       of 2020 by which the writ petition filed by respondent No. 1 herein
       (original petitioner) was allowed thereby setting aside the order
       dated 31.08.2020 passed by the Appellate Authority for Advance
       Ruling, Karnataka (for short, “the AAAR”). The AAAR in its ruling
       had declared while affirming the ruling of the Authority for Advance
       Ruling, Karnataka (for short, “the AAR”) that the services provided
       by the respondent No. 1 herein (original petitioner) in the form of
       leasing of residential premises as hostel to students and working
       professionals does not fall within the ambit of Entry 13 of the
       Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017.
       In other words, the respondent No. 1 herein would not be entitled
       to the exemption on services viz. renting of residential dwelling for
       use as a residence under Entry 13 of the Notification No. 9/2017
       dated 28.06.2017.

       FACTUAL MATRIX
3.     The facts giving rise to these appeals may be summarised as under.
4.     The respondent No. 1 before us is the co-owner of a residential
       property situated in Bangalore. The property consists of 42 rooms. It is
       a four storied building with terrace and common area. On 21.06.2019
       the respondent No. 1 along with other the co-owners executed a
       lease deed in favour of M/s DTwelve Spaces Private Limited (fort
       short, “the lessee”). The lessee in turn leased out the residential
       property as hostel to provide long term accommodation to students
       and working professionals with the duration of stay ranging from 3
       months to 12 months.
[2025] 12 S.C.R.                                                         371

     The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


5.     The Central Government by way of Notification No.9/2017- Integrated
       Tax (Rate) dated 28.06.2017 (hereinafter referred to as “the Exemption
       Notification”) has granted exemption from payment of goods and
       services tax in respect of services which includes renting services
       which are provided with respect to residential dwelling for use as
       residence.
6.     The respondent No. 1 herein (original petitioner) with a view to seek
       clarification with regard to his eligibility to claim exemption on the
       rent received by him from the lessee by letting the property preferred
       an Advance Ruling application in the prescribed Form under Section
       97 of the Integrated Goods and Services Tax Act, 2017 (for short,
       “the Act”) before the AAR. The AAR vide its ruling dated 23.03.2020
       inter alia held that the services viz. renting of residential dwelling
       for use as a residence do not fall under Entry 13 of the Exemption
       Notification. It held that the lessee being a company is not itself
       using the premises in question. In such circumstances, it was held
       by the AAR that the respondent No. 1 herein has to charge goods
       and services tax (for short, ‘GST’) while issuing invoices to the
       lessee provided it was registered under the Act. Accordingly, it was
       held that the benefit of Exemption Notification is not available to the
       respondent No.1 herein (original petitioner).
7.     The respondent No. 1 herein (original petitioner) being dissatisfied
       with the ruling of the AAR filed an appeal under Section 100 of the
       Act before the AAAR. The AAAR vide order dated 31.08.2020 inter
       alia while affirming the AAR’s ruling held that the property rented
       out by the respondent No. 1 herein (original petitioner) is a hostel
       building which is more akin to a sociable accommodation rather
       than what is commonly understood as residential accommodation.
       In other words, the AAAR held that the subject property rented out
       by the respondent No. 1 herein (original petitioner) cannot be termed
       as a rented accommodation. It was further held that the benefit of
       Exemption Notification is available only if the residential dwelling
       is used as a residence by the person who has taken the same on
       rent/lease. Thus saying so, the appeal filed by the respondent No. 1
       herein (original petitioner) was ordered to be dismissed.
8.     In such circumstances referred to above, the respondent No. 1
       herein (original petitioner) invoked the jurisdiction of the High Court
       by filing Writ Petition No. 14891 of 2020 and questioned the legality
       and validity of the order passed by the AAAR.
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9.     The High Court formulated the following question of law for its
       consideration:-
           “Whether the service of leasing of residential premises
           provided by the petitioner as hostel to students and working
           professionals is covered under Entry 13 of the Notification
           9/2017 dated 28.06.2017 i.e. “services by way of renting
           of residential dwelling for use as residence” issued under
           the Act.”
10. The High Court vide its impugned judgment and order allowed the
    writ petition holding that Entry 13 of the Notification No. 9/2017 which
    provides for exemption with respect to ‘services by way of renting
    of residential dwelling by way of use as residence’ being clear and
    unambiguous, the petitioner was entitled to avail the benefit under
    the exemption notification. The High Court held that the definition of
    ‘residential dwelling’ in erstwhile service tax law as provided by the
    Education Guide dated 20.06.2012 issued by the Central Board of
    Indirect Taxes and Customs (CBIC), i.e. ‘residential dwelling means
    any residential accommodation and is different from hotel, motel,
    inn, guest house etc, which is meant for temporary stay’ is binding
    on the revenue. It was held that leasing of residential premises as
    hostel to students and working professionals would not attract GST.
11. Relying on the decision of this Court in Kishore Chandra Singh
    Deo v. Babu Ganesh Prasad Bhagat, reported in AIR 1954 SC 316
    and the Bombay High Court decision in the matter of Bandu Ravji
    Nikam v. Acharyaratna Deshbushan Shikshan Prasark Mandal,
    Kolhapur, reported in 2003 (3) Mah L.J. 472, the High Court held
    that the hostel is used by the students for the purpose of residence
    and the duration of stay is more as compared to a hotel, guest house.
12. The High Court further observed that if a particular expression is
    not defined in the Act, it is permissible to refer to the dictionary
    meaning of such expression. The High Court, after referring to the
    dictionary meanings of the words ‘residential dwelling’ and decisions
    of this Court in Mohinder Singh v. State of Haryana, reported in
    AIR 1989 SC 1367 and Commissioner of Central excise, Delhi v.
    Allied Air-Conditioning Corpn., reported in in 2006 (7) SCC 735,
    held that hostels used for residential purpose by the students and
    working women is covered under ‘residential dwelling’. The residential
    dwelling is being rented and used by the students and working
[2025] 12 S.C.R.                                                       373

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


     women for the purpose of residence and there is no such condition
     in the Exemption Notification that the lessee itself has to use the
     premises as residence.
13. The High Court further held that the findings of the AAAR that the
    hostel accommodation is more akin to a sociable accommodation
    and that the petitioner is registered as a commercial establishment
    under the Karnataka Shops and Commercial Establishment Act,
    1961 are not relevant in any manner for the purpose of determining
    the eligibility of the respondent No. 1 herein (original petitioner) for
    exemption.
14. Being dissatisfied with the judgment and order passed by the High
    Court, the revenue is before us.

     SUBMISSIONS ON BEHALF OF THE REVENUE
15. Mr. V. Chandrashekara Bharathi, the learned counsel appearing for
    the revenue vehemently submitted that the High Court committed an
    egregious error in taking the view that the first transaction between
    the lessor and the lessee i.e. the service of leasing of residential
    premises provided by the respondent No. 1 herein (original petitioner)
    to M/s DTwelve Spaces Private Limited (lessee) entitles the lessor
    to seek exemption under Entry 13 of the Exemption Notification
    9/2017 dated 28.06.2017.
16. He would submit that for the purpose of making the relevant entry
    applicable, the following three conditions need to be fulfilled:-
     a.   There must be a supply of service of renting.
     b.   The renting service must pertain to a residential dwelling, and
     c.   Such residential dwelling must be used as a residence.
17. He would submit that all the above three conditions must be
    conjunctively satisfied. According to him, even if one of the limbs is
    not triggered, then the benefit of the exemption cannot be claimed.
18. The learned counsel invited our attention to the following relevant
    clauses of lease deed dated 21.06.2019: -
          1. “The lessee (M/s DTwelve) is engaged in the business
          of running, managing, operating the day-to-day affairs of
          residential premises and, sub leases/sub-licenses such
374                                                          [2025] 12 S.C.R.

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            residential premises to individuals (including student) for
            the purpose of long stay accommodation (purpose).”
            2.   Clause 2.1 of the lease deed reads as follows:
                 “In consideration of the rent, maintenance, costs,
                 operations cost as agreed herein, to be paid by
                 the lessee as set out in the agreement and the
                 lessor’s representations, warranties, covenants and
                 obligations contained herein the lessor(s) hereby
                 grants permission and leases unto the lessee
                 the leased premises for the purpose during the
                 subsistence of the lease term, subject to the terms
                 and conditions of this agreement”.
            3.   Clause 12 of the lease deed reads as follows:
                 “12.1 – The parties hereby acknowledge that the
                 lessee has taken the lease of the entire property
                 from the lessor(s) for all the activities that are in the
                 opinion of the lessee, necessary for the purpose.
                 12.2 – The lessee has a right to sub-lease or /and
                 license and/or sub-license the entire property during
                 the lease term to any third party for the purposes”.
19. According to the learned counsel, the plain reading of the clauses
    referred to above has the following effect:-
       a.   The co-owners under the lease agreement recognised that M/s
            DTwelve Spaces Private Limited were running and managing
            various premises and leased it to individuals for long stay
            accommodations.
       b.   In addition to recognizing the above, the same was also agreed
            and declared between the parties that it would be the purpose
            of the lease deed.
       c.   The sole reason for the lease is for the above purpose as per
            Clause 2 and that is why the right to sub-lease was granted
            to M/s. DTwelve Spaces Private Limited for the same purpose
            under Clause 12.
20. He would argue that considering the above, M/s. DTwelve Spaces
    Private Limited being the party to the first transaction cannot be said
[2025] 12 S.C.R.                                                         375

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     to be using the property as residence and thereby rendering the first
     transaction ineligible for exemption under the said entry.
21. He submitted that the High Court ought to have rejected the
    contention canvassed on behalf of the respondent No. 1 herein
    (original petitioner) that Entry 13 does not prescribe any condition
    that the lessee must himself use the property as residence for the
    following reasons:-
     (i)    When admittedly, what is being tested for exemption is the
            first transaction, the respondent cannot be permitted to import
            the facts and circumstances of the second transaction in an
            attempt to satisfy the contours of the exemption notification. In
            other words, the respondent is relying on the first transaction
            to satisfy the first two conditions (services by way of renting
            of residential dwelling) and relies on the second transaction to
            satisfy the third condition (for use as residence). This is simply
            not permissible.
     (ii)   It is incorrect to state that the exemption entry does not
            prescribe the lessee to use the property as residence. Though
            not explicitly stated, it has been implicitly prescribed. What is
            eligible as exemption under Entry 13 is the supply of “service
            by way of renting”. This supply involves two parties. One is
            the supplier i.e., the co-owners and the other is the recipient
            who is M/s DTwelve Spaces Private Limited. When this supply
            of service is exempted under the Notification, the respondent
            No. 1 cannot be permitted to rely on transactions with parties
            not privy to the supply, to satisfy the contours of the exemption
            notification. The supplier of this service i.e., the co-owners
            have no connection whatsoever with the persons who utilize
            the property ultimately. The present case is not concerned with
            such persons in any manner. Since what is exempt is the supply
            of a service, it is implied that the recipient of the supply must
            satisfy the condition precedent for the exemption notification
            to trigger and the supplier cannot travel beyond the supply to
            claim exemption.
22. He would further submit that:-
     a)     The charge of GST is on the taxable event of supply defined
            under Section 7, and the levy on such supply is prescribed
            under Section 9.
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       b)   The Exemption Notification No. 9/2017 exempts ‘inter-state
            supply of services’. In other words, the Exemption Notification
            is supply specific and supply-centric, aligned with the levy of
            GST which too is supply-specific.
       c)   Consequently, the conditions prescribed in Entry 13 of
            Notification 9/2017 must be tested purely within the premise of
            a particular supply. This approach is aligned with the principle
            that exemption notifications are to be construed strictly.
       d)   Therefore, the submission of the revenue that the facts of the
            second limb between the lessee and the end consumer must not
            be factored for testing the supply of service between the lessor
            and the lessee, will not amount to rewriting the Notification.
       e)   Unless and until Entry13 itself prescribes the ultimate end use
            of being used as residence, such conditions cannot be imported
            into the Exemption Notification. In fact, it is this submission of
            the assessee that amounts to rewriting the Notification.
       f)   The judgement in Government of Kerala v. Mother Superior
            Adoration Convent reported in (2021) 5 SCC 602, has no
            applicability since the underlying circumstances of the exemption
            in the present case has no similarity with the exemption
            considered in the case of Mother Superior (supra).
       g)   Section 3(1)(b) of the Kerala Building Tax Act, 1975 exempted
            buildings that are used “principally” for religious, charitable or
            educational purposes. It is the expression “principally” that
            weighed in favour of this Court while extending the exemption to
            residential accommodations for Nuns and hostel accommodation
            attached to various educational institutions. This Court applied
            the dominant object test only because the exemption Section
            allowed such test to be conducted.
       h)   Further, in Para 15 of Mother Superior (supra), a factual finding
            had been rendered that the buildings seeking exemptions were
            all attached to either convents or educational institutions. On
            facts it was found that these attached buildings were not let out
            for the purpose of earning profit but were let out as integrally
            connected with the religious or educational activity. It is on this
            factual basis that the exemption was extended. In the same
            Para 15, it has been categorically held that had the very same
[2025] 12 S.C.R.                                                         377

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           persons rented a building, which was let out purely for earning
           market rent, would not have entitled the building for exemption.
           In the present case, admittedly, the Agreement between the
           Lessor and the Lessee is a commercial transaction purely for
           the purpose of making profit.
     i)    Mother Superior (supra) undoubtedly held that in beneficial
           exemptions, the ambiguity must be ruled in favour of the subject.
           Assuming without admitting that Entry 13 of Notification 9/2017
           is indeed a beneficial notification, the subject which is the
           target of the benefit would be service recipient in the context
           of GST Law. The Service recipient in so far as the first supply
           is concerned between the lessor and the lessee is the lessee,
           a profit-oriented commercial entity. The Exemption Notification
           definitely was not conceived to extend the benefit to such
           commercial entities, which intended to carry out its commercial
           ventures by taking properties on lease.
23. In the last, the learned counsel submitted that the respondent No. 1
    herein (original petitioner) is not entitled to exemption as the property
    in question does not qualify as a residential dwelling. The classification
    as to whether the property in question would qualify as a residential
    dwelling or not must solely depend on the nature of the property
    and not on its ultimate use, as the Exemption Notification itself treats
    these two aspects as independent of each other. Admittedly, the
    present property comprises of 42 rooms, each attached with its own
    washroom. Such a property, by applying the common parlance test,
    can never qualify as a residential dwelling. Further, the Notification
    under question does not define what a residential dwelling is. Under
    the erstwhile Service Tax Regime, Section 66(D)(m) exempted the
    same services as covered by the present Entry 13 of Notification
    9/2017. Since the entries are pari materia, the education guide is
    of paramount importance, more particularly paragraphs 4.13 and
    4.13.1 respectively.
24. The learned counsel invited our attention to Para 4.13.1 which defines
    ‘residential dwelling’ as follows:-
           “The phrase residential dwelling has not been defined in
           the Act. It has therefore to be interpreted in terms of the
           normal trade parlance as per which it is any residential
           accommodation, but does not include hotel, motel, inn,
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          guest house, camp site, lodge, houseboat, or like places
          meant for temporary stay.”
25. He would submit that the above definition is in two parts. The
    first part requires the property under question to be a residential
    accommodation, and the second part carves out certain exceptions
    from the ambit of the definitions, despite being for residential
    accommodation. The property in question which has 42 rooms with
    42 attached washrooms each are akin to the kinds of properties that
    have been excluded under the education guide from the definition
    of residential dwelling. Therefore, according to the learned counsel,
    the property in question does not qualify as a residential dwelling.
26. In such circumstances referred to above, the learned counsel prayed
    that there being merit in these appeals, the same may be allowed and
    the judgment and order passed by the High Court may be set aside.

       SUBMISSIONS ON BEHALF OF THE RESPONDENT NO. 1
       (LESSEE)
27. On the other hand, Mr. Arvind P. Datar, the learned senior counsel
    appearing for the respondent No. 1 while vehemently opposing the
    appeals submitted the no error, not to speak of any error of law,
    could be said to have been committed by the High Court in passing
    the impugned judgment and order.
28. He submitted that the respondent No. 1 along with four other joint
    owners had collectively let out the subject residential property to M/s
    DTwelve Spaces Private Limited – lessee for sub-letting the said
    property to working women and students for long term stay ranging
    from 3 months to 11 months. He pointed out that the available data
    reveals that the students or working women on an average stayed
    for eight months in the said property.
29. The learned counsel submitted that M/s DTwelve Spaces Private
    Limited (lessee) is an aggregator and has set up a unique business
    model that has proved immensely beneficial to several students and
    working professionals. Several landlords have entered into lease
    agreements with M/s DTwelve Spaces Private Limited (lessee)
    for renting out hostel/PG accommodation for students or working
    professionals. The website of M/s DTwelve Spaces Private Limited
    shows the availability of such accommodation in different cities
[2025] 12 S.C.R.                                                      379

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     enabling parents/students/working professionals to book residential
     accommodation/hostel accommodation.
30. Mr. Datar pointed out that the lease deed was entered into on
    16.06.2019. The total rent paid from June 2019 to June 2022 was
    Rs. 1,12,38,200/-. The total IGST liability at the rate of 18% was
    Rs. 20,22,876/-. He further brought to our notice that from 2022,
    IGST is being paid at 18% as an amendment to Entry 13 of the
    Exemption Notification came into effect on 18.07.2022.
31. According to Mr. Datar, the contention canvassed on behalf of the
    appellant that such exemption should be denied because the lessee
    being a company is not using the subject residential property itself
    for the residential purposes deserves to be outright rejected. He
    would argue that, if such a submission is accepted, it would amount
    to rewriting the Entry 13 as “services by way of renting of residential
    dwelling for use as residence by the lessee”.
32. He submitted that all the three conditions cumulatively required to
    be fulfilled to be eligible for exemption from payment of IGST, viz.
    (a) services must be of renting; (b) the property so let out must be a
    residential dwelling, and (c) such residential dwellings must be given
    for use as a residence stand fulfilled in the present case.
33. He submitted that the High Court after due consideration of all the
    relevant provisions rightly reached to a plausible conclusion which
    requires no interference at the hands of this Court under Article 136
    of the Constitution.
34. In such circumstances referred to above, Mr. Datar prayed that there
    being no merit in the appeals, those may be dismissed.

     ANALYSIS
35. Having heard the learned counsel appearing for the parties and
    having gone through the materials on records, the only question
    that falls for our consideration is whether the amount at the rate
    of 18% is payable on the rental amount paid by the lessee to the
    respondent No. 1 herein?
36. We would like to first address ourselves on the issue whether the
    subject property could be termed as a “residential dwelling”. The term
    “residential dwelling” is not defined under the GST laws. Under the
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                         Supreme Court Reports


       erstwhile Finance Act, 1994, an Education Guide dated 20.06.2012
       issued by the CBIC explained it as follows:-
           “4.13.1 What is a ‘residential dwelling’?
           The phrase ‘residential dwelling’ has not been defined in
           the Act. It has therefore to be interpreted in terms of the
           normal trade parlance as per which it is any residential
           accommodation, but does not include hotel, motel, inn,
           guest house, camp-site, lodge, house boat, or like places
           meant for temporary stay.”
37. Prior to the implementation of the GST, only commercial properties
    let out were subjected to service tax even if a residential property
    was used for commercial purposes. Service tax was charged at a
    rate of 15% of the rent for commercial properties. However, rental
    income from residential properties did not attract service tax. This
    meant that landlords who owned commercial properties and rented
    them out were required to register for service tax and pay the tax
    on the rental income received. On the other hand, landlords who
    owned residential properties and rented them out were not required to
    register for service tax or pay tax on the rental income they received.
38. On the introduction of GST, the tax regime for rental income has
    undergone a significant change. Under the GST regime, renting both
    commercial and residential properties is treated as a taxable supply
    of service. GST is applicable on rental income received by landlords
    as well as rent paid by tenants.
39. However, the Central Government, on being satisfied that it is
    necessary in the public interest and on the recommendation of the
    GST Council, has issued Notification No. 9/2017- Integrated Tax (Rate)
    dated 28.06.2017 giving exemption from levying GST on various
    services described item wise in the Notification. For our purpose, it
    relates to Entry No. 13 by which an unconditional exemption was
    provided to renting of a residential dwelling to any person when the
    same is used for residence. Meaning thereby, GST is payable in
    the case of renting of a residential dwelling to any person when the
    same is used for the commercial purpose.
40. In the above context, we may refer to few judgments wherein the
    meaning of the expression “residential dwelling” has been explained.
[2025] 12 S.C.R.                                                       381

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


41. The Delhi High Court in V.L. Kashyap v. R.P. Puri reported in 12
    (1976) DLT 369, wherein, in para 25, it has been held as under:-
          “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.”
                                                (Emphasis supplied)

42. The United Kingdom House of Lords in Uratemp Ventures Limited v.
    Collins reported in (2001) 3 WLR 806, wherein the term ‘dwelling
    house’ has been interpreted to mean even a single room as part
    of a house.
43. The High Court of Bombay in Bandu Ravji Nikam (supra) has
    explained “residential dwelling” in detail. In this case, a suit for
    eviction of a tenant was contested by the tenant saying that the
    landlord was attempting to evict him in order to lease out the
    premises to a hostel and that hostel accommodation amounted to
    ‘non residential accommodation’ which was impermissible under
    Section 25 of Bombay Rent Control Act. The High Court held that by
    the very nature of the use of students hostel, it is only a residential
    user as hostel, is a house of residence or lodging for students and
    that just because the hostel owners charge some amount from the
    students, such accommodation cannot be treated as commercial or
    non residential.
44. In Bandu Ravji Nikam (supra), the Bombay High Court further held
    as under in para 10:-
          “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,
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                     Supreme Court Reports


       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 Sri
       Sri Sri Kishore Chandra Singh Deo vs Babu Ganesh
       Prasad Bhagat and others, AIR 1954 Sc 316, 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”.
       This Court then proceeded to hold that the legislature
       is using words “non-residential purpose” in Section 25
       did not intend to prohibit use of a building containing a
       residential flat for the purposes of construction of Marriage
       Halls, Charitable Hospitals and “quarters” and garages for
       Doctors and Nurses. As in the present case, “Students
       hostel” was also to be used for sleeping, eating, studies
       etc. temporarily if not permanently day to day, it cannot be
       described as “non-residential” use within the meaning of
       Section 25 of the Act. Accordingly, if the suit premises were
       to be used as students hostel, then surely it would be for
       the residential purpose of the students of the College run
       by the respondent trust. In that case also, the respondent
       trust would be entitled to claim possession of the suit
       premises for the requirement of the trust. If this be so,
       there is no force in the argument pressed into service that
       no decree could be passed as the nature of requirement
       would be prohibited by Section 25 of the Act.”
                                             (Emphasis supplied)
[2025] 12 S.C.R.                                                         383

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


45. We must also look into the meaning of the expressions “residence”
    and “dwelling” as provided in Concise Oxford English Dictionary
    2013 Edition as well as the Blacks Law Dictionary 6th Edition to
    ascertain their meaning in common parlance and in popular sense
    which read as under:-
          “The Concise Oxford Dictionary:
          Domicile: 1. the country in which a person has permanent
          residence.
          2. the place at which a company or other body is registered.
          Residence: 1. the fact of residing somewhere.
                      2.   a person’s home.
                      3.   the official house of a government minister
                           or other official figure.
          Blacks Law Dictionary:
          Residence: Place where one actually lives or has his
          home; a person’s dwelling place or place of habitation;
          an abode; house where one’ home is; a dwelling house.
          Dwelling: The house or other structure in which a person or
          persons live; a residence; abode; habitation; the apartment
          or building, or a group of buildings, occupied by a family as
          a place of residence. Structure used a place of habitation.”
46. Further in common parlance, ‘residential dwelling’ means any building,
    structure, or part of the building or structure other than offices or
    factories, that is used or intended to be used as a home, residence, or
    sleeping place by one person or by two or more persons maintaining
    a common household, to the exclusion of all others.
47. Thus, any residential accommodation meant for long term stay can
    be referred to as “residential dwelling”. The materials on record
    further indicate that as per the Khatha Extract and layout plans and
    records available with the Bruhat Bangalore Mahanagara Palike, the
    plot and property is shown as residential in nature. In view of the
    aforesaid, we have no hesitation in reaching the conclusion that the
    subject property is a “residential dwelling”.
48. The only question now left to be addressed is whether the third
    condition to be eligible for exemption from payment of the GST i.e.
384                                                         [2025] 12 S.C.R.

                          Supreme Court Reports


       “such residential dwelling must be given for use as a residence” is
       fulfilled in the present case or not.
49. In the present case, the third condition could also be said to be satisfied
    as the property was taken on rent only for use as a residence. There
    is no further condition that the tenant or lessee must itself use it as
    a residence. Indeed M/s DTwelve Spaces Private Limited (lessee)
    is an aggregator who facilitates the use of residential dwelling for
    hostel accommodation. The third condition stood satisfied as M/s
    DTwelve Spaces Private Limited is the lessee and all the students/
    working women are none else but sub-lessees. It is well-settled
    that what is a lease between the owner of a property and a tenant
    becomes a sub-lease when it is entered into between the tenant
    and his sub-tenant.
50. Taking the view aforesaid, for the period 2019-2022 all the three
    conditions of Entry No.13 cited above stood complied with.
51. We are not impressed by the submission canvassed on behalf of
    the revenue that since lessee did not use the hostel as a residence
    but rather sub-leased the same to students/working women, such
    transaction does not fall within Entry 13 of the Exemption Notification.
    At the cost of repetition, it is observed that Entry 13 of the Exemption
    Notification does not mandate that the lessee must use the residential
    dwelling as its own residence. Giving any other interpretation would
    mean adding an additional condition to Entry 13.
52. Mr. Datar is right in his submission that giving Entry 13 a narrow
    interpretation by holding that it is available only when the property
    so rented is used by service recipient themselves would ultimately
    lead to the legislative intent being defeated as the exemption is
    extended to cases wherein residential dwelling is rented out and
    ultimately used as residence even for the purpose of the person
    using it. In other words, the legislative intent behind this exemption
    clause is that a rented property that is used as residence should not
    suffer 18% GST or IGST.
53. In the case on hand, the ultimate use of the property as residence
    remains unchanged. However, if 18% GST is levied on this transaction
    between the respondent No. 1 and the lessee i.e. M/s DTwelve
    Spaces Private Limited, the same would ultimately be passed on
    to the students and working professionals which would lead to a
[2025] 12 S.C.R.                                                           385

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


     situation where the legislative intent behind granting exemption for
     residential use is defeated.
54. In Mother Superior (supra), it was held as follows:
          “26. It may be noticed that the five-Judge Bench judgment
          [Commr. of Customs v. Dilip Kumar & Co., (2018) 9
          SCC 1] did not refer to the line of authority which made
          a distinction between exemption provisions generally and
          exemption provisions which have a beneficial purpose.
          We cannot agree with Shri Gupta’s contention that sub
          silentio the line of judgments qua beneficial exemptions
          has been done away with by this five-Judge Bench. It is
          well settled that a decision is only an authority for what
          it decides and not what may logically follow from it (see
          Quinn v. Leathem [Quinn v. Leathem, 1901 AC 495 (HL)]
          as followed in State of Orissa v. Sudhansu Sekhar Misra
          [State of Orissa v. Sudhansu Sekhar Misra, (1968) 2 SCR
          154 : AIR 1968 SC 647] , SCR at pp. 162-63 : AIR at pp.
          651-52, para 13).
          27. This being the case, it is obvious that the beneficial
          purpose of the exemption contained in Section 3(1)(b) must
          be given full effect to, the line of authority being applicable
          to the facts of these cases being the line of authority which
          deals with beneficial exemptions as opposed to exemptions
          generally in tax statutes. This being the case, a iteral
          formalistic interpretation of the statute at hand is to be
          eschewed. We must first ask ourselves what is the object
          sought to be achieved by the provision, and construe the
          statute in accord with such object. And on the assumption
          that if any ambiguity arises in such construction, such
          ambiguity must be in favour of that which is exempted.”
                                                  (Emphasis supplied)

55. In Union of India v. Wood Papers Limited, reported in (1990) 4
    SCC 256, it was pointed out that an exemption notification should be
    construed strictly at the threshold. But once the exception/exemption
    is applicable, then a liberal construction must be adopted. The ration
    of this judgment clearly applies to the present case. Entry 13 grants
    exemption from GST for renting of residential dwellings for use as
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                           Supreme Court Reports


       residence. On a strict construction thereof, all the three requirements
       referred to above are satisfied. Once the exemption notification is
       applicable, it should be construed liberally. Thus, if the conditions
       are satisfied, the benefit should be available to both lessees and
       the sub-lessees as well.
56. In the above context, we may refer to the following observations of
    this Court in Wood Papers Limited (supra):-
            “4. Entitlement of exemption depends on construction
            of the expression “any factory commencing production”
            used in the Table extracted above. Literally exemption is
            freedom from liability, tax or duty. Fiscally it may assume
            varying shapes, specially, in a growing economy. For
            instance tax holiday to new units, concessional rate of tax
            to goods or persons for limited period or with the specific
            objective etc. That is why its construction, unlike charging
            provision, has to be tested on different touchstone. In fact
            an exemption provision is like an exception and on normal
            principle of construction or interpretation of statutes it is
            construed strictly either because of legislative intention
            or on economic justification of inequitable burden or
            progressive approach of fiscal provisions intended to
            augment State revenue. But once exception or exemption
            becomes applicable no rule or principle requires it to
            be construed strictly. Truly speaking liberal and strict
            construction of an exemption provision are to be invoked
            at different stages of interpreting it. When the question
            is whether a subject falls in the notification or in the
            exemption clause then it being in nature of exception is
            to be construed strictly and against the subject but once
            ambiguity or doubt about applicability is lifted and the
            subject falls in the notification then full play should be
            given to it and it calls for a wider and liberal construction.
            Therefore, the first exercise that has to be undertaken
            is if the production of packing and wrapping material in
            the factory as it existed prior to 1964 is covered in the
            notification.”
57. In Collector of Central Excise v. Parle Exports (P) Ltd. reported in
    (1989) 1 SCC 345, this Court while accepting that exemption clause
[2025] 12 S.C.R.                                                        387

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


     should be construed liberally applied rigorous test for determining
     if expensive items like Gold Spot base or Limca base or Thums
     Up base were covered in the expression food products and food
     preparations used in Item No. 68 of First Schedule of Central Excises
     and Salt Act and held ‘that it should not be in consonance with spirit
     and the reason of law to give exemption for non-alcoholic beverage
     basis under the notification in question’. Rationale or ratio is same.
     Do not extend or widen the ambit at stage of applicability. But once
     that hurdle is crossed construe it liberally. Since the respondent did
     not fall in the first clause of the notification there was no question
     of giving the clause a liberal construction and hold that production
     of goods by respondent mentioned in the notification were entitled
     to benefit.

     PURPOSIVE INTERPRETATION OF ENTRY 13
58. The principle of ‘purposive interpretation’ or ‘purposive construction’
    is based on the understanding that the Court is supposed to attach
    that meaning to the provisions which serve the ‘purpose’ behind such
    a provision. The basic approach is to ascertain what is it designed
    to accomplish? To put it otherwise, by interpretative process the
    Court is supposed to realise the goal that the legal text is designed
    to realise. As Aharan Barak in Purposive Interpretation in Law
    puts it:-
          “Purposive interpretation is based on three components:
          language, purpose, and discretion. Language shapes the
          range of semantic possibilities within which the interpreter
          acts as a linguist. Once the interpreter defines the range,
          he or she chooses the legal meaning of the text from
          among the (express or implied) semantic possibilities. The
          semantic component thus sets the limits of interpretation
          by restricting the interpreter to a legal meaning that the
          text can bear in its (public or private) language.”
59. Of the aforesaid three components, namely, language, purpose
    and discretion ‘of the Court’, insofar as purposive component is
    concerned, this is the ratio juris, the purpose at the core of the text.
    This purpose is the values, goals, interests, policies and aims that
    the text is designed to actualize. It is the function that the text is
    designed to fulfil.
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60. We may also emphasize that the statutory interpretation of a
    provision is never static but is always dynamic. Though literal rule
    of interpretation, till some time ago, was treated as the ‘golden
    rule’, it is now the doctrine of ‘purposive interpretation’ which is
    predominant, particularly in those cases where literal interpretation
    may not serve the purpose or may lead to absurdity. If it brings about
    an end which is at variance with the purpose of statute, that cannot
    be countenanced. Not only legal process thinkers such as Hart
    and Sacks rejected intentionalism as a grand strategy for statutory
    interpretation, and in its place they offered purposivism, this principle
    is now widely applied by the Courts not only in this country but in
    many other legal systems as well. (See : Shailesh Dhairyavan v.
    Mohan Balkrihna Lulla reported in (2016) 3 SCC 619)
61. Giving Entry 13 a narrow interpretation by holding that it is available
    only when the property so rented is used by service recipient
    themselves would ultimately lead to legislative intent being defeated
    as the exemption is extended to cases wherein residential dwelling
    is rented out and ultimately used as residence, irrespective of the
    person using it. The legislative intent behind this exemption clause
    is that a rented property, that is used as residence should not suffer
    18% GST or IGST. However, if Entry 13 is given such a narrow
    interpretation, then, exemption will not be available in cases where
    a lessee has sub-leased the property for use as residence.
62. In the present matter, the ultimate use of the property remained
    unchanged. In other words, it remained as ‘use for residence’ by
    students/working women. However, if 18% GST is levied on this
    transaction between the respondent No. 1 and the lessee, the same
    will be passed on to the students and working professionals which
    would ultimately lead to a situation where legislative intent behind
    granting exemption for residential use is defeated.
63. In addition to above, it is pertinent to note that exemption envisaged
    under Entry 13 is an activity specific exemption and not person
    specific exemption. There are many exemptions given under GST
    law which are person specific exemptions and are applicable only
    when service provider or recipient is among the notified category
    of persons. On the other hand, there are many exemptions which
    are activity specific exemptions whereby an activity is given an
[2025] 12 S.C.R.                                                        389

   The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.


     exemption, and such exemptions are not dependent on the person
     using the service that is exempt.
64. For instance, under Entry 1, exemption is provided to services by
    an entity registered under section 12AA of the Income-tax Act, 1961
    by way of charitable activities. Here, exemption is provided only if
    charitable activities are provided by an entity registered under Section
    12AA of the Income Tax Act. Entry 26 is another example which
    provides exemption to transmission or distribution of electricity by
    an electricity transmission or distribution utility.

     AMENDMENTS IN 2022
65. Entry 13 was amended w.e.f. 18.07.2022 and it now reads as follows:-
          “Services by way of renting of residential dwellings for use
          as residence except where the residential dwelling is
          rented to a registered person.”
66. Thus, from 18.07.2022, there is no exemption available for
    respondent 1, as he has rented to a registered person. Through
    these appeals, the revenue is, in effect, trying to give retrospective
    application to the amendment made in 2022, which is impermissible.
67. Apart from the above amendment in 18.07.2022, further Explanation
    was added to Entry 13 w.e.f. 01.01.2023 which reads as follows:-
          “Explanation- for the purpose of exemption under this
          entry, this entry shall cover services by way of renting of
          residential dwelling to a registered person where, -
          (i) The registered person is proprietor of a proprietorship
          concern and rents the residential dwelling in his personal
          capacity for use as his own residence; and
          (ii) Such renting is on his own account and not that of the
          proprietorship concern.”
68. The Explanation clearly shows that even if the rent is paid by a
    registered person, the exemption will be available if it is used for
    the purpose of own residence and is rented in the personal capacity.
    Therefore, the intention from the beginning was to ensure that rental
    agreements for use of the property for residential purposes are
    granted exemption from GST.
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69. In view of the aforesaid discussion, we have reached the conclusion
    that we should not interfere with the impugned judgment and order
    passed by the High Court. As a result, both the appeals fail and are
    hereby dismissed.
70. Pending application, if any, stand disposed of accordingly.

       Result of the case: Appeals dismissed.




       †
           Headnotes prepared by: Nidhi Jain