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2023 (8) TMI 1558 - AAR - GSTEligibility for GST exemption on hostel accommodation services - 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 - The term residential dwelling has not been defined either under CGST Act or under Notification No. 12/2017. However under the erstwhile service tax law in paragraph 4.13.1 of the Taxation of Services An Education Guide dated 20.06.2012 issued by the CBIC the expression residential dwelling has been interpreted in terms of the normal trade parlance as per which it is any residential accommodation but does not include hotel motel inn guest house campsite lodge house boat or like places meant for temporary stay. 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. 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. Requirement for GST registration based on turnover - HELD THAT - 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 - 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. Taxability and applicable GST rate for hostel accommodation services - 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 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). Tax treatment of in-house food supply as part of hostel services - 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. 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 supply. 5. Scope of advance ruling under Section 97(2) of the GST Act. 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 defined in the CGST Act, but generally refers to a place where people reside as a home. The Authority found that the hostel, which provides accommodation to students and working women, does not fit this definition as it offers temporary lodging with additional services such as food and housekeeping. The premises are rented out on a per-bed basis, indicating a commercial activity rather than residential dwelling. Therefore, the services provided by the applicant do not qualify for the exemption. 2. Requirement for GST registration based on turnover: The applicant's service of providing hostel accommodation is considered a taxable supply under the GST Act. As per Section 22 of the GST Act, any supplier whose aggregate turnover exceeds twenty lakh rupees in a financial year is required to register for GST. Since the applicant's services do not qualify for exemption, they are required to register if their turnover exceeds this threshold. 3. Applicable GST rate for hostel accommodation services: The Authority determined that the supply of hostel accommodation services falls under Tariff heading 9963, which pertains to "Accommodation, food and beverage services." According to Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended, these services are taxable at 9% CGST + 9% SGST. The Authority clarified that hostel services, which are for longer-term stays and provide basic facilities, cannot be equated with hotel accommodations, which are typically for short-term stays and offer more amenities. 4. Taxability of in-house food supply as part of composite supply: The applicant provides food and other services along with accommodation, which constitutes a composite supply under Section 2(30) of the GST Act. In a composite supply, the tax rate applicable to the principal supply applies to the entire supply. Since the principal supply is hostel accommodation, which is taxable at 18%, the same rate applies to the composite supply, including the in-house food services. 5. Scope of advance ruling under Section 97(2) of the GST Act: The fifth question posed by the applicant was not addressed as it did not fall within the scope of Section 97(2) of the GST Act, which outlines the specific matters on which an advance ruling can be sought. As such, no ruling was issued for this question. Ruling Summary: 1. Hostel accommodation services provided by the applicant are not exempt from GST. 2. The applicant must register for GST if their turnover exceeds twenty lakh rupees. 3. Hostel accommodation services are taxable at 18% (9% CGST + 9% SGST). 4. In-house food supply is part of a composite supply and is taxable at 18%. 5. No ruling was issued for the fifth question as it was outside the scope of the Act.
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