2019 (3) TMI 1473 - AAR - GST

Charitable Activities or not - hostel accommodation provided by Trusts to students - exemption under Sl. No. 1 of N/N. 12/2017-CT (Rate) - donations received to meet the expenses for running the hostel - levy of GST. Whether hostel accommodation provided by Trusts to students is covered within the definition of Charitable Activities and thus, exempt under Sl. No. 1 of notification No.12/2017-CT (Rate)? - Held that - From the Notification Entry no. 1 and the meaning assigned to the expression charitable activities , it is found that activities of the Trust in providing hostel accommodation facilities to the students who come to Pune for education do not fall within the ambit of charitable activities - this is in conformity with the clarification issued by the Tax Research Unit vide Circular No. 32/06/2018-GST dated 12th February 2018 - the hostel accommodation provided by Trusts to students is not covered by exemption Notification Entry No.1 of Notification No. 12/2017-CT (Rate). Whether different treatment would be required for use of hostel rooms given by us for residential purposes but ultimately been used by the hirer for commercial use? - Held that - As per the clarification issued vide Circular No. 32/06/2018-GST dated 12th February 2018, that the distinction between services by a hotel, inn guest house club or composite, by whatever name called, for residential or lodging purposes and Hostel accommodation services is done away. In the present case applicant submits that during the vacation period hostel is offered for residential purpose and hired for labourers of a commercial organization - the description of service is use based, meaning that if the accommodation is used for residential or lodging purpose then it is immaterial who the user is. The services provided by such hostel, for residential and lodging purposes would be covered by the scope of notification entry where the declared tariff of a unit of an accommodation is below one thousand rupees per day. Therefore the scope of the entry is restricted to use of the accommodation unit for residential and lodging purpose. Whether the said notification would be applicable if the accommodation if decided to be given for commercial purposes in future whether the activity still would be able to enjoy exemption under said notification? - Held that - We reiterate the scope of exemption entry 14 of the Notification 12/2017 which is applicable to accommodation unit when used only for residential or lodging purpose. Whether the large donations given by the donors would be treated as service and taxed accordingly and whether only sponsored donations are believed to be covered under said mega exemption notification? - Held that - Even though the concept is explained in the context of the Charitable Religious Trust, we find that the principle that emerges from it is equally applicable to the case at hand and that if the income is in nature of donation received without any instructions, then it would not be subject to GST - the donations received without any instruction would not be taxable however where the donor is clearly receiving identifiable benefits in return either in terms of advertising or publicity, the said donation amount received is to be treated as a consideration for supply of goods or services or both and liable to GST.

Issues Involved:
1. Whether hostel accommodation provided by Trusts to students is covered within the definition of Charitable Activities and thus, exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate).
2. Whether the donations received to meet the expenses for running the hostel are chargeable to GST.
3. Whether different treatment would be required for use of hostel rooms given for residential purposes but ultimately used for commercial purposes.
4. Whether the said notification would be applicable if the accommodation is given for commercial purposes in the future.
5. Whether large donations given by donors would be treated as ‘service’ and taxed accordingly and whether only sponsored donations are covered under the said mega exemption notification.

Detailed Analysis:

Issue 1: Hostel Accommodation as Charitable Activities
The applicant, a charitable trust providing hostel accommodation to economically backward students, sought clarification on whether such services fall under "Charitable Activities" and are thus exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate). The Authority observed that the activities of the Trust, which include lodging, boarding, and personality development training, do not fall within the ambit of "charitable activities" as defined in para 2(r) of notification No. 12/2017-CT (Rate). The Authority referred to Circular No. 32/06/2018-GST dated 12th February 2018, which clarified that hostel accommodation services do not qualify as charitable activities. However, services provided by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff below one thousand rupees per day are exempt under Sl. No. 14 of notification No. 12/2017-CT (Rate).

Conclusion: Hostel accommodation provided by Trusts to students is not covered by exemption Notification Entry No. 1 of Notification No. 12/2017-CT (Rate). However, it is covered under Sl. No. 14 of the same notification if the tariff is below one thousand rupees per day.

Issue 2: Donations Received for Running the Hostel
The applicant questioned whether donations received to meet hostel expenses are chargeable to GST. The Authority clarified that GST is applicable only on commercial transactions. Donations are not considered as consideration for any supply of goods or services if the donor does not receive any benefit in return. Therefore, freely given donations without any identifiable benefit to the donor are not subject to GST.

Conclusion: Donations received without any identifiable benefit to the donor are not chargeable to GST.

Issue 3: Use of Hostel Rooms for Commercial Purposes
The applicant inquired whether different treatment is required if hostel rooms, initially provided for residential purposes, are used for commercial purposes. The Authority noted that the exemption under Sl. No. 14 of Notification No. 12/2017-CT (Rate) applies only if the accommodation is used for residential or lodging purposes. If the rooms are used for commercial purposes, they do not qualify for the exemption.

Conclusion: If hostel rooms are used for commercial purposes, they do not qualify for the exemption under Sl. No. 14 of Notification No. 12/2017-CT (Rate).

Issue 4: Future Commercial Use of Accommodation
The applicant sought clarification on whether the exemption would apply if the accommodation is given for commercial purposes in the future. The Authority reiterated that the exemption under Sl. No. 14 of Notification No. 12/2017-CT (Rate) is applicable only for residential or lodging purposes. Therefore, future commercial use of the accommodation would not be exempt.

Conclusion: The exemption does not apply if the accommodation is used for commercial purposes in the future.

Issue 5: Taxability of Large Donations
The applicant asked whether large donations would be treated as 'service' and taxed accordingly. The Authority noted that donations without any specific instructions or identifiable benefits to the donor are not subject to GST. However, if the donor receives any identifiable benefit in return, such as advertising or publicity, the donation is considered as consideration for a supply and is liable to GST.

Conclusion: Donations without identifiable benefits to the donor are not taxable. Donations with identifiable benefits to the donor are considered as consideration for supply and are taxable.

Order:
1. Hostel accommodation provided by Trusts to students is not covered under "Charitable Activities" and is not exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate). However, it is exempt under Sl. No. 14 if the tariff is below one thousand rupees per day.
2. Donations received without any identifiable benefit to the donor are not chargeable to GST.
3. Use of hostel rooms for commercial purposes does not qualify for the exemption under Sl. No. 14.
4. The exemption does not apply if the accommodation is used for commercial purposes in the future.
5. Donations without identifiable benefits to the donor are not taxable; those with identifiable benefits are taxable.

← Previous Next →