Case Title: Seema Gupta v. Union Of India
According to the Delhi High Court, there is no Goods and Service Tax due when renting residential property for personal use.
The division bench of Justice Manmohan and Justice Manmeet Pritam Singh noted that, in accordance with Notification No. 04/2022-Central Tax (Rate) dated 13.07.2022., the rental of a residential dwelling to a proprietor of a registered proprietorship firm who rents it in his capacity for use as his residence and not for use in the course or furtherance of his proprietorship firm's business shall be exempt from tax.
The petitioner argued that Clause (A)(b) of Notification No. 04/2022-Central Tax (Rate), dated July 13, 2022, is unconstitutional because it violates Article 14 of the Indian Constitution and goes beyond the authority granted by the GST Act of 2017.
The petitioner claimed that the exemption provided by a prior notification dated July 28, 2017, for renting out residential accommodation is no longer available to tenants who are registered under GST as of the notification dated July 13, 2022. The amendment particularly impacted proprietary concerns of the petitioners. Denial of exemption based solely on the tenant's GST registration is not supported by any intelligible differentia, and the distinction in question has no connection to the desired outcome.
The department acknowledged that the notification had not distinguished between the properties rented for personal use and those renting for business purposes and that additional steps would be taken to modify the exemption notification appropriately. The department agreed that residential property rented out for personal use will be treated as exempt in the interim.
The department is obligated by the notification dated July 28, 2017; the court ruled.
The court ordered the department to only charge and collect GST in cases where the registered person rents out residential property in the course or advancement of their business.