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2023 (8) TMI 1556 - AAR - GSTEligibility for GST exemption for hostel accommodation under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) - requirement of registration in the state of Tamil Nadu if their aggregate turnover in a financial year exceeds twenty lakh rupee - supply of services by way of providing hostel accommodation falls under Tariff heading 9963 or not - activity of supply of in-house food to the inmates of the hostel amounts to providing services in a composite manner or not. Whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence and thus eligible for exemption or not? - HELD THAT - It is clear that 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. Hence it is clear that hostel accommodation is not equivalent to residential accommodation and hence 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. It is clear 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 . 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 the supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST 9% SGST under Sl.No. 7(vi) of the above Notification (Sl.No. 7 (ix) as per original notification). 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 for hostel accommodation under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). 2. Requirement for GST registration based on turnover. 3. Applicable GST rate for hostel accommodation services. 4. Taxability of in-house food supply as part of composite services. 5. Ruling on a question outside the scope of Section 97(2) of the GST Act. Issue-wise Detailed Analysis: 1. Eligibility for GST Exemption: The primary issue was whether the hostel accommodation provided by the Applicant qualifies as a "residential dwelling for use as residence" under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). The judgment emphasized that the term "residential dwelling" is not defined in the CGST Act. However, it is generally understood as a place where people reside treating it as a home, which does not include amenities like food or housekeeping. The Applicant's hostel, providing accommodation on a per-bed basis with ancillary services, was deemed a commercial activity rather than a residential dwelling. Consequently, the exemption was not applicable as the hostel did not meet the criteria of being a residential dwelling used as a residence. 2. Requirement for GST Registration: The Applicant's service of providing hostel accommodation was classified as a transaction in the course of business, constituting a "supply" under Section 7(1)(a) of the CGST Act. Therefore, the Applicant is required to register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the GST Acts. 3. Applicable GST Rate for Hostel Accommodation Services: The judgment determined that hostel accommodation services fall under Tariff heading 9963, which pertains to "Accommodation, food, and beverage services." The applicable tax rate was identified as 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. Hostel services, being distinct from hotel accommodations, were subject to this specific tax rate. 4. Taxability of In-house Food Supply: The Applicant provided in-house food to hostel inmates as part of a composite service, which included accommodation and other services. The judgment clarified that this constitutes a composite supply, where the principal supply is the hostel accommodation service. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply (hostel accommodation) applies to the entire composite supply. Therefore, the composite service, including in-house food supply, is taxable at 18%. 5. Ruling on Question Outside the Scope of Section 97(2): The fifth question raised by the Applicant did not fall within the scope of Section 97(2) of the GST Act, and hence, no ruling was issued on this matter. Ruling Summary: - The hostel accommodation services provided by the Applicant are not eligible for GST exemption under Entry 12. - The Applicant must register for GST if their turnover exceeds twenty lakh rupees. - Hostel accommodation services are taxable at 9% CGST + 9% SGST. - In-house food supply, as part of composite services, is taxable at 18%. - No ruling was issued for the fifth question as it was outside the scope of the GST Act provisions.
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