Supreme Court Affirms GST Exemption for Hostel/PG Leases, Says 2022 Curbs Don’t Apply Retroactively

Overview

• Justices JB Pardiwala and KV Viswanathan upheld the Karnataka High Court ruling that leases of residential premises used as hostels or PGs qualify for the residential-renting exemption.
• The case involved a Bengaluru building leased to M/s DTwelve Spaces Pvt Ltd, an aggregator that sub-leased rooms for long-term stays by students and working professionals.
• The bench rejected the revenue’s view that the tenant must itself reside in the property, holding that Entry 13’s condition is satisfied when the ultimate use remains residential.
• The court noted a 2022 change to Entry 18 that withholds the exemption when premises are rented to a GST-registered person, and ruled that this change cannot operate retrospectively.
• The judgment shields pre-2022 arrangements from 18% GST that would have been passed on to residents, while leaving the post-2022 position unchanged prospectively.