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2020 (1) TMI 1509 - AAR - GSTClassification of services - composite supply - bundled supply of services or not - principal supply is of rent of hostel accommodation - hostel accommodation along with food facility to the students wherein consolidated amount is charged from the students - exemption from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended if the charges per day is less than ₹ 1000/- - taxability on supply of hostel accommodation along with food facility - rate of GST. HELD THAT - The services supplied are more than two and taxable under GST Act, 2017 and are supplied in ordinary course of business by the applicant - Bundling/ Naturally bundled has not been defined in GST law, hence, reference can be taken from CBEC Education Guide issued in 2012 after introduction of negative list in erstwhile Service Tax regime when concept of bundling was introduced for the first time. It is found that naturally bundled services are those services wherein one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service - If current nature of supply of services is tested based on above factors, it can be ascertained that the provision of hostel accommodation could be a principal supply but ancillary services like food, gym, housekeeping, play room, cannot be said to arise naturally with the principal service of hostel accommodation and therefore are not bundled naturally with principal supply - the ancillary services like gym, housekeeping, play room, TV in dinning hall are not naturally bundled with principal supply of accommodation service and therefore as per definition of Composite Supply discussed above, the supply by the applicant is not a composite supply. Service of serving of food to students in hostel - HELD THAT - The applicant is providing service of serving of food to students in hostel. The said service is classifiable under HSN 996333 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST @ 5% as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended). Providing playroom services to students residing in hostel - HELD THAT - The said service is a kind of sporting/recreational service classifiable under HSN 999652 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST @ 18% as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Housekeeping and room cleaning services to students residing in hostel - HELD THAT - The said service is classifiable under HSN 998533 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST @ 18% as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The highest rate of GST is 18% amongst various services provided by the applicant to students in hostel. As the services supplied by the applicant is a Mixed Supply and will attract GST @ 18%. Exemption from GST - HELD THAT - Hon'ble West Bengal Authority for Advance Ruling under GST in the matter of IN RE M/S. SARJ EDUCATIONAL CENTRE 2019 (2) TMI 1605 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL on the similar issue viz. whether lodging along with food to the students by a private boarding house is a composite supply and eligible for exemption under Sl. No. 14 of Notification No. 12/2017-CT(Rate) dated 28.06.2017 it was held that Sl. No. 66 of the Exemption Notification is applicable to the services provided by or to an educational institution, as defined under clause 2(y) of the said notification. The Applicant is not an educational institution within the meaning of the above clause. Although the services are provided in terms of an MOU with St Michael s School, the Applicant charges the consideration on the individual students. Being liable to pay the consideration, such students are, therefore recipients of the Applicant s services and not the educational institution. Sl. No. 66 of the Exemption Notification is, therefore, not applicable Thus, the entire charges recovered from the students is not exempted from GST under Sr. No. 14 of the GST (Rate) Notification No. 12/2017 dated 28.06.2017 (as amended).
Issues Involved:
1. Classification of Services 2. Applicability of a Notification Issued under the Provisions of the GST Act 3. Determination of Liability to Pay Tax on Services 4. Taxability and Rate of GST on Composite Supply 5. Appropriate Classification and Applicable Rate of GST on Supply of Hostel Accommodation with Food Facility Detailed Analysis: 1. Classification of Services: The applicant, a registered entity, provides hostel accommodation along with ancillary services like food, gym, housekeeping, etc., to students for a consolidated fee of ?17,000 per month. The primary question is whether this constitutes a 'composite supply' under Section 2(30) of the CGST Act, 2017. Applicant's Interpretation: - The applicant argues that the services provided are naturally bundled and should be treated as a composite supply, with the principal supply being the hostel accommodation. - They cite that since the daily charges for accommodation do not exceed ?1000, the entire service should be exempt from GST under Notification No. 12/2017. Authority's Findings: - The provision of hostel accommodation along with ancillary services falls under 'Supply' as defined in Section 7 of the GST Act, 2017. - For a service to be classified as a composite supply, it must consist of two or more taxable supplies that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one being the principal supply. 2. Applicability of a Notification Issued under the Provisions of the GST Act: The applicant contends that the hostel accommodation service, being less than ?1000 per day, should be exempt from GST under Sr. No. 14 of Notification No. 12/2017. Authority's Findings: - The ancillary services like food, gym, housekeeping, and playroom are not naturally bundled with the principal supply of accommodation service. - These services can be independently supplied and are not integral to the accommodation service. Hence, the supply does not qualify as a composite supply. 3. Determination of Liability to Pay Tax on Services: The authority examines whether the supply of hostel accommodation along with ancillary services is a composite supply or a mixed supply. Authority's Findings: - The services provided by the applicant are not naturally bundled and do not constitute a composite supply. - Instead, the services are classified as a mixed supply under Section 2(74) of the GST Act, 2017, which means the highest rate of GST applicable to any of the services in the bundle will apply to the entire supply. 4. Taxability and Rate of GST on Composite Supply: The applicant argues that the entire service should be exempt from GST as the daily charges for accommodation do not exceed ?1000. Authority's Findings: - Since the supply is classified as a mixed supply, the highest rate of GST among the services provided will apply. - The highest rate of GST among the services provided by the applicant is 18% (CGST 9% + SGST 9%). 5. Appropriate Classification and Applicable Rate of GST on Supply of Hostel Accommodation with Food Facility: The authority examines the classification and rate of GST applicable to each service provided by the applicant. Authority's Findings: - Hostel accommodation service is exempt from GST as the daily charges are below ?1000. - Gym services attract 18% GST. - Food services attract 5% GST. - Playroom services attract 18% GST. - Housekeeping and room cleaning services attract 18% GST. Since the services provided constitute a mixed supply, the entire supply will attract the highest rate of GST, which is 18%. Ruling: The provision of hostel accommodation along with food facility, playroom, gym, housekeeping, and room cleaning to students, where a consolidated amount is charged, is classified as a mixed supply. The entire charge recovered from the students is not exempt from GST under Sr. No. 14 of Notification No. 12/2017. The highest rate among the services provided is 18%, and thus, the rate of GST on the whole supply will be 18% (SGST 9% + CGST 9%).
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