2019 (7) TMI 314 - AAAR - GST

Classification of supply of services - services of lodging and food exclusively to the students - composite supply or not - Whether or not services provided by the Appellant to the students of lodging and supply of food is a composite supply within the meaning of Section 2(30) of the GST Act? - HELD THAT - In the instant case, the Appellant is claiming that it is an educational institution by itself, which appears to be erroneous in view of the clause 05 of the Memorandum of Understanding dated 01.04.2006 where it is specifically mentioned that the Appellant has to impart remedial classes to the week students at the instruction of the parents of the boarders /day boarders. In other words, the activity undertaken by the Appellant i.e., impart remedial classes. has nothing to do with activities undertaken by St Michael s School. Hence, the Appellant is having independent and separate identity - The Appellant, M/s. Sarj Educational Centre, clearly does not come under the definition of Educational Institution as envisaged in clause 2(y) of the Exemption Notification and thus serial no 66 of the Exemption Notification is not applicable. Whether supply of such service is eligible for exemption under Sl. No. 14 of Notification No. 12/2017-CT (Rate) dated 28/06/2017? - HELD THAT - Composite Supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply as defined under Section 2(30) of the GST Act - In the instant case, the Applicant is engaged in supplying flood, laundry service, housekeeping service. etc. which are not naturally bundled with the lodging service. All these components are independent of each other and can be supplied separately It is also evident from the submission of the Appellant that they also provide lodging service without providing food and Day Boarders do not laundry services. Therefore, none of the Services are bundled together in a natural and there appears to be no principal Service. There is no infirmity in the ruling pronounced by the West Bengal Authority for Advance Ruling - Appeal dismissed.

Summary

Issues involved:
Appeal against Advance Ruling Order on composite supply and exemption eligibility under GST Act.

Analysis:
1. Composite Supply Classification:
The Appellant, a private boarding house, sought clarification on whether its services of lodging and food to students constitute a composite supply under the GST Act. The West Bengal Authority for Advance Ruling (WBAAR) ruled that the services offered were mixed supplies, not composite, and hence taxable under Section 8(b) of the GST Act. The Appellant challenged this classification, arguing that the nature of boarding and lodging services differed significantly, with boarding including food and other amenities, while lodging was just accommodation. The Appellant contended that the entire charge should not be artificially segregated for taxation purposes.

2. Educational Institution Status:
The Appellant claimed to be an educational institution under the Exemption Notification, citing its provision of primary and secondary education through remedial classes. However, the WBAAR found that the Appellant did not meet the criteria of an educational institution as per the Exemption Notification's definition. The Appellant's direct billing to students and separate identity from the affiliated school indicated a lack of educational institution status, leading to the inapplicability of the exemption.

3. Legal Definitions and Precedents:
The Appellant referenced legal definitions of educational institutions and composite supplies to support their arguments. They highlighted the comprehensive nature of education and the bundling of services in a composite supply, as clarified by Circulars and previous rulings. The Appellant also cited a ruling from Chhattisgarh regarding hostel services to bolster their case for exemption from GST.

4. Judicial Interpretation and Dismissal of Appeal:
The Appellant's contentions were carefully examined by the Appellate Authority, which reiterated the criteria for composite and mixed supplies under the GST Act. The Authority upheld the WBAAR's ruling, emphasizing that the Appellant's services did not meet the conditions for a composite supply due to the independent nature of the various services provided. The lack of a principal service and natural bundling led to the dismissal of the appeal, affirming the original ruling's correctness.

In conclusion, the Appellate Authority for Advance Ruling upheld the original ruling, dismissing the appeal against the classification of services as mixed supplies and the denial of exemption as an educational institution. The detailed analysis considered legal definitions, precedents, and the specific nature of the services provided by the Appellant, resulting in the affirmation of the taxability of the services under the GST Act.