2022 (5) TMI 407 - AAAR - GST

Classification of services - Hostel Accomodation services - composite supply - caritable activitties or not - Whether Hostel facility which includes Lodging and Boarding service provided by appellant to the students of MUST having value of service upto Rs.1000/- per day would be eligible for exemption under entry no. 14 of the notification 12/2017 CTR Dt. 28-06-2017? - applicability of N/N. 12/2017-CT (Rate) - HELD THAT - As per Section 2 (74) of the CGST Act the term mixed supply means two or more individual supplies of goods or services, or any combination thereof made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. In the instant case the appellant is supplying services of food along with Hostel Accommodation service. In view of the discussion, it is held that supply of food with Hostel Accommodation service is not naturally bundled in normal course of business. It has been also informed by the appellant that a cafeteria (canteen) has been provided for day scholars, in which they can optionally take snacks and F B as per their choice. In the present case, others services being provided by the Appellant are not naturally bundled or ancillary to Hostel service as the inhabitants of Hostel seats can avail these services from any other source. In fact the inhabitants have been restricted from sourcing these other services from any other person. Consequently, the inhabitants have to avail these services from the Appellant. In such situations, the other services are not ancillary to or bundled with the Hostel service. The word per unit of accommodation should be understood as per general practice adopted by large number of service provider in similar business model. In hotels, generally it fixes per room, per suit whereas in hostels, inns and dharmshalas, it fixes per room, per bed, per seat and per person. From the facts mentioned by the appellant, it would emerge that they provides accommodation service in hostel and fix the tariff on the basis of hostel seat, therefore the contention of appellant is agreed upon and it is found that hostel seat should be considered as a unit of accommodation. Appeal disposed off.

Summary

Issues Involved:
1. Classification of Hostel Accommodation Service under GST.
2. Determination of the Unit of Accommodation.
3. Nature of Service: Composite Supply vs. Mixed Supply.
4. Eligibility for GST exemption under Notification No. 12/2017.

Detailed Analysis:

1. Classification of Hostel Accommodation Service under GST:
The appellant, a society registered under the Societies Registration Act, 1860, and a Public Charitable Trust under Section 12AA of the Income Tax Act, 1961, provides hostel accommodation services to students of Mody University of Science & Technology (MUST). The primary issue is whether these services, including lodging and boarding, qualify for exemption under Entry No. 14 of Notification No. 12/2017-CT (Rate). The Rajasthan Authority for Advance Ruling (AAR) determined that the service provided is a mixed supply under Section 2(74) of the CGST Act, 2017, and not a composite supply under Section 2(30).

2. Determination of the Unit of Accommodation:
The appellant argued that the unit of accommodation should be a 'Hostel Seat' rather than a 'Room'. The AAR considered the room as the unit of accommodation. The appellant provided examples from different scenarios (Dharamshalas, hotels, airports) to support their argument that the unit of accommodation should be based on the business model and not necessarily a room. The appellate authority agreed with the appellant, stating that in the context of hostels, the tariff is generally fixed per bed, per seat, or per person, and thus, a hostel seat should be considered the unit of accommodation.

3. Nature of Service: Composite Supply vs. Mixed Supply:
The appellant contended that the hostel accommodation service, combined with meals (Food & Beverages), constitutes a composite supply under Section 2(30) of the CGST Act, 2017, with the principal supply being hostel accommodation. They argued that the services are naturally bundled and inseparable in the ordinary course of business. The AAR, however, held that the services provided are not naturally bundled and thus constitute a mixed supply. The appellate authority supported this view, noting that the provision of food services is independent and can be supplied separately, as evidenced by the existence of a separate cafeteria for day scholars.

4. Eligibility for GST Exemption under Notification No. 12/2017:
The appellant sought exemption under Entry No. 14 of Notification No. 12/2017-CT (Rate), which exempts services by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff below Rs. 1000 per day per unit of accommodation. The appellate authority noted that as per Section 8(b) of the CGST Act, 2017, in the case of mixed supply, the highest rate of tax applicable to any of the supplies in the bundle would apply. Therefore, since the supply is classified as mixed, the highest rate of tax applicable to the combined services (accommodation and food) would be charged, negating the exemption sought by the appellant.

Conclusion:
The appeal was disposed of with the following determinations:
- The hostel seat is considered the unit of accommodation.
- The service provided by the appellant is a mixed supply, not a composite supply.
- The highest rate of tax applicable to the mixed supply will be charged, and the exemption under Entry No. 14 of Notification No. 12/2017-CT (Rate) is not applicable.