2022 (5) TMI 182 - AAAR - GST

Exemption from GST - Accommodation Service or independent clinical establishment - benefit of entry No.74 of exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Aahana Naturopathy Centre - classified under SAC Heading 9993 - composite supply or not - HELD THAT - In the instant case the applicant has advertised and marketed their accommodation service as their main service and Naturopathy as additional service. Thus, the accommodation service and other services including Naturopathy rendered during the course of said service is covered under composite service and the accommodation service constitutes the predominant element and therefore, becomes the principal supply and other services including Naturopathy shall form the part of that composite supply. On true and fair analysis of the aforesaid Notification, the conclusion is compelling that all services provided in relation to or in addition to accommodation service are liable to GST applicable to 'Accommodation Service' in as much as, all such ancillary/additional activities having a proximal nexus with accommodation service.

Summary

Issues:
Classification of services under SAC Heading 9993 for exemption eligibility.

Analysis:
The appeal was filed against an Advance Ruling Order regarding the eligibility of a nature reserve to benefit from an exemption under Notification No. 12/2017-Central Tax (Rate). The applicant sought clarification on whether their Naturopathy Centre could be classified under SAC Heading 9993 for exemption eligibility. The Authority for Advance Ruling had initially ruled that the applicant was not eligible for the exemption due to the classification of their services under a different sub-heading.

During the personal hearing, the applicant's representative reiterated their appeal submissions, emphasizing the healthcare services provided by the Naturopathy Centre. The discussion focused on whether the Naturopathy Centre could be considered an independent clinical establishment and whether the appointment of an authorized medical practitioner supported their claim for exemption eligibility under Entry No. 74 of the exemption notification.

The analysis delved into the legal provisions related to composite supply, principal supply, and tax liability determination for composite or mixed supplies under the CGST Act. It was established that the accommodation service provided by the applicant was the principal supply, with Naturopathy services being ancillary to it. Therefore, all services related to or in addition to accommodation services were deemed liable to GST applicable to accommodation services.

Ultimately, the Appellate Authority upheld the original ruling, stating that the services provided by the applicant, including Naturopathy, were to be classified under the sub-heading applicable to accommodation services. The decision was based on the predominant nature of the accommodation service and its relation to other services provided by the applicant.

This detailed analysis of the issues involved in the judgment showcases the application of legal provisions and considerations in determining the eligibility of the applicant for exemption under the relevant notification.