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2023 (8) TMI 1554 - AAR - GSTExemption from GST on hostel accommodation services - tariff heading and the rate of taxability of the supply of service - Taxability of in-house food supply as part of composite supply. Exemption from GST on hostel accommodation services - HELD THAT - The hostel accommodation is not equivalent to residential accommodation and hence it is held 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. Tariff heading - rate of taxability of the supply of service - HELD THAT - The 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 the supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST 9% SGST under Sl.No. 7(vi) of the Notification (Sl. No. 7 (ix) as per original notification). Taxability of in-house food supply as part of composite supply - HELD THAT - 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. Further there is a single price for the combined services. The principal activity of the Applicant is supply of accommodation Services. While providing such services the charges are being realised in a consolidated manner for the value of food and other like services rendered. The Applicant has stated that they do not charge separately for the other services provided by them. Thus the services provided by the Applicant are composite in nature. 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. 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 on hostel accommodation services. 2. Tariff heading and rate of taxability for hostel accommodation services. 3. Taxability of in-house food supply as part of composite supply. 4. Admissibility of certain questions under Section 97(2) of the GST Act. Issue-Wise Detailed Analysis: 1. Eligibility for GST Exemption on Hostel Accommodation Services: The primary issue was whether the hostel accommodation provided by the Applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017, which exempts "services by way of renting of residential dwelling for use as residence." The term "residential dwelling" is not explicitly defined under the CGST Act or the notification. However, based on the interpretation under the erstwhile service tax regime, a residential dwelling is typically a place where people reside treating it as a home, not including temporary accommodations like hostels. The judgment noted that the Applicant's hostel services, which involve renting out beds with additional services, do not qualify as renting a residential dwelling for use as residence. The ruling emphasized that hostels are commercial establishments providing temporary lodging, and thus, the exemption does not apply. 2. Tariff Heading and Rate of Taxability for Hostel Accommodation Services: The judgment addressed the appropriate tariff heading and tax rate for the Applicant's hostel accommodation services. It was determined that the services fall under Tariff heading 9963, which pertains to "Accommodation, food and beverage services." The applicable tax rate for these services is 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment clarified that hostel services, being different from hotel accommodations, are subject to this specific tax rate. 3. Taxability of In-House Food Supply as Part of Composite Supply: The Applicant argued that the supply of in-house food to hostel inmates should be considered part of a composite supply, potentially exempt if the principal service (hostel accommodation) were exempt. However, since the hostel accommodation is taxable, the composite supply, including food services, is also taxable. The judgment applied Section 8 of the CGST Act, which states that the tax rate for a composite supply is determined by the principal supply's tax rate. Consequently, the composite supply, with hostel accommodation as the principal service, is taxable at 18%. 4. Admissibility of Certain Questions Under Section 97(2) of the GST Act: The judgment also considered the admissibility of the Applicant's questions under Section 97(2) of the CGST/TNGST Act. It was determined that only Questions 1 to 4 fell within the scope of Section 97(2)(a), (b), & (f), making the application admissible for these questions. However, no ruling was issued for Question No. 4, as it did not fall under the specified scope of Section 97(2). Ruling: - The services by way of providing hostel accommodation are not eligible for exemption under the specified notifications. - The supply of hostel accommodation services falls under Tariff heading 9963 and is taxable at 9% CGST + 9% SGST. - The supply of in-house food to hostel inmates is part of a composite supply, taxable at 18%. - No ruling was issued for Question No. 4 due to its inadmissibility under Section 97(2).
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