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2023 (8) TMI 1562 - 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 for hostel accommodation. 2. Requirement for GST registration. 3. Taxability and tariff classification of hostel accommodation services. 4. Tax implications on the supply of in-house food as a composite supply. 5. Scope of advance ruling under Section 97(2) of the GST Act. Issue-wise Detailed Analysis: 1. Eligibility for GST Exemption for Hostel Accommodation: 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 judgment clarified that the term "residential dwelling" is not defined under the CGST Act or the notification. However, based on the erstwhile service tax guidelines and common understanding, a residential dwelling is considered a place where people reside as a home, which does not include temporary accommodations like hostels. The applicant's hostel, providing accommodation to students and working women, was deemed more akin to commercial accommodation rather than a residential dwelling. Consequently, the services did not qualify for the exemption, as the premises were not rented for use as a residence. 2. Requirement for GST Registration: Given that the hostel accommodation services provided by the applicant do not qualify for exemption, the applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year. The judgment emphasized that the services provided fall under the definition of "supply" as per Section 7(1)(a) of the CGST Act, which necessitates registration under Section 22 of the GST Acts. 3. Taxability and Tariff Classification of Hostel Accommodation Services: The judgment classified the hostel accommodation services under Tariff heading 9963, which pertains to accommodation, food, and beverage services. It was determined that these services are taxable at 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment distinguished hostel services from hotel accommodations, noting that hostels are used for longer periods with basic facilities, unlike hotels which are for temporary stays with more amenities. 4. Tax Implications on the Supply of In-house Food as a Composite Supply: The applicant also provided in-house food services to the hostel inmates, which were considered part of a composite supply. According to Section 2(30) of the GST Act, a composite supply consists of two or more taxable supplies naturally bundled together. The principal supply in this case is the hostel accommodation service, which is taxable at 18%. Therefore, the entire composite supply, including the in-house food, is subject to the same tax rate of 18%. 5. Scope of Advance Ruling under Section 97(2) of the GST Act: 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. The judgment reiterated that advance rulings can only be sought on specific matters enumerated under Section 97(2). Ruling: 1. The hostel accommodation services provided by the applicant are not eligible for GST exemption under the relevant notification entries. 2. The applicant must register for GST if their turnover exceeds the specified threshold. 3. The services are taxable under Tariff heading 9963 at 9% CGST and 9% SGST. 4. The supply of in-house food is part of a composite supply, taxable at 18%. 5. No ruling was provided for the fifth question as it was outside the scope of Section 97(2).
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