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2023 (12) TMI 819 - AAR - GSTExemption from GST - hostel accommodation extended by the Applicant hostel - eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No. 09/2017-IT (Rate) dated 28.06.2017, as amended or not - Requirement to take registration - Supply or not - Tariff heading - rate of taxability of the supply of service - composite exempt supply. Whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence as described in the above entry and thus eligible for exemption or not? - HELD THAT - Generally, renting of residential dwelling involves letting out any building or part of the building by a lessor to a person or family (related persons) against a rent for using rooms which form part of a house as kitchen, bedroom, and living room etc., on the whole as residence. Thus, a common understanding of the term residential dwelling is one where people reside treating it as a home. Moreover, renting of residential dwelling does not include amenities like food, housekeeping, or laundry etc., whereas, a hostel is that of an establishment which provides living accommodation to a specific categories of persons such as students workers. The Applicant has rented out the premises with the intention of providing hotel accommodation which is more akin to sociable accommodation rather than what is typically considered as residential accommodation. A house/ residential dwelling for occupation contain one or more rooms with one/part of the room being used as kitchen and the other/part as living room etc. But, in the instant case, a single house with two or more rooms where normally a single family resides, is subdivided, and let out to different persons and rent being collected on per bed basis with bundle of other services against a consideration clearly constitutes a business of supplying accommodation services along with ancillary services. Thus, on this count as well, the impugned accommodation thus provided does not qualify as a residential dwelling and thus the question of using the same as residence does not arise. Regarding the second part of the description of service Tor use as residence it is observed that, though accommodation and residence seems to be synonymous, there is a subtle difference between the two. An accommodation is a location where someone is accommodated or provided with lodging. The term residence on other hand, in common usage, refers specifically to a place where someone resides permanently or for an extended period of time along with family/dependents - it is clear that hostels refer to a place where someone is accommodated or provided with lodging or boarding and lodging facilities against a charge or fees for the services rendered - the premises rented out by the Applicant cannot be construed as residential dwelling. The purpose and objective of the notification is nothing but to avoid taxing residential properties taken on rent by family or individuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of renting of residential dwelling for use as residence, being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence - it is clear that hostel accommodation is not equivalent to residential accommodation and hence we hold that the services supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No. 09/2017 IT(Rate) dated 28.06.2017, as amended. Requirement to take registration - Supply or not - HELD THAT - The Applicant s service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended, the Applicant is very much be required to take registration under the GST Enactments, as the arrangement between the Applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2 (b) of the Second Schedule to the CGST Act, the said transaction constitutes supply - the Applicant is required to get themselves registered in the state of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees. Tariff heading - rate of taxability of the supply of service - HELD THAT - It is observed that hotels are meant for a temporary stay (2-5 days) and have lot of facilities and staff, but hostels are used for a longer period and have basic facilities with minimal staff required by the inmates to stay at a reasonable rate. Therefore, hostel services cannot be equated to a hotel accommodation and hotel GST rates cannot be applied to a hostel. Therefore, we hold that supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST 9% SGST under SI.No. 7(vi) of the above Notification In the event of the hostel accommodation being an exempt activity, whether the incidental activity of supply of in-house food to the inmates of the hostel would also be exempt being in the nature of a composite exempt supply? - HELD THAT - Firstly, the service of providing hostel accommodation is not an exempt activity. It is seen from the submissions of the Applicant, that along with the provision of accommodation services, they are also providing food and certain other services to the inmates of the hostel for consolidated charges - The natural bundle has the characteristic of where one service is the main service and the other services are ancillary services which help in better enjoyment of the main service - As per Section 8 of the CGST Act, 2017, for a Composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply. It is held that since the Applicant provides a number of services in a composite manner, the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, will be tax rate for the composite supply provided by them.
Issues Involved:
1. Eligibility for GST exemption for hostel accommodation. 2. Requirement for GST registration. 3. Applicable GST rate for hostel accommodation services. 4. Taxability of incidental supply of in-house food. 5. Additional issue outside the scope of Section 97(2) of the GST Act. Summary of Judgment: 1. Eligibility for GST exemption for hostel accommodation: The primary issue was whether the hostel accommodation provided by the Applicant qualifies for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). The Authority determined that the term "residential dwelling" does not include hostels, which are considered commercial establishments providing temporary lodging. As such, the services supplied by the Applicant are not eligible for exemption under the specified entry. 2. Requirement for GST registration: The Applicant is required to register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. The arrangement between the Applicant and the hostel occupants constitutes a "supply" in the course of business under Section 7(1)(a) of the CGST Act, 2017. 3. Applicable GST rate for hostel accommodation services: The supply of hostel accommodation services falls under Tariff heading 9963 and is taxable at 9% CGST + 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended by Notification No. 20/2019 - Central Tax (Rate). 4. Taxability of incidental supply of in-house food: The activity of supplying in-house food to hostel inmates is considered part of a composite supply, with the principal supply being hostel accommodation services. Therefore, the composite supply is taxable at the rate applicable to the principal supply, which is 18%. 5. Additional issue outside the scope of Section 97(2) of the GST Act: No ruling was issued for the fifth question as it did not fall within the scope of Section 97(2) of the GST Act. Ruling: 1. Services by way of providing hostel accommodation are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). 2. The Applicant must register for GST if their turnover exceeds twenty lakh rupees. 3. Hostel accommodation services are taxable at 9% CGST + 9% SGST. 4. The supply of in-house food is part of a composite supply taxable at 18%. 5. No ruling for the fifth question as it is outside the scope of Section 97(2) of the GST Act.
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