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2023 (8) TMI 1563 - 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. Applicable tariff heading and tax rate for hostel accommodation services. 3. Taxability of in-house food supply as a composite service. 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 GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) and the corresponding TNGST notification. The relevant entry exempts services by way of renting a residential dwelling for use as a residence. The term "residential dwelling" is not defined in the CGST Act, but under the erstwhile service tax regime, it was interpreted as any residential accommodation excluding temporary stay facilities like hotels and hostels. The judgment found that the applicant's hostel accommodation, which includes amenities like food and housekeeping, does not qualify as a "residential dwelling" as it is more akin to a commercial establishment providing temporary lodging. Therefore, the services supplied by the applicant are not eligible for exemption under the said notification. 2. Applicable Tariff Heading and Tax Rate for Hostel Accommodation Services: The judgment addressed the tariff heading and tax rate applicable to the applicant's hostel services. It was determined that the supply of hostel accommodation falls under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The applicable tax rate for such services is 9% CGST and 9% SGST under Sl. No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended by Notification No. 20/2019. This classification reflects the nature of hostel services as distinct from hotel accommodations, which are typically for shorter stays and have different facilities. 3. Taxability of In-house Food Supply as a Composite Service: The judgment examined whether the supply of in-house food to hostel inmates is exempt as part of a composite supply. It was concluded that the provision of food, along with accommodation and other services, constitutes a composite supply, with the principal supply being accommodation services. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply applies to the entire composite supply. Consequently, the composite supply, including in-house food, is taxable at 18%, which is the rate for the principal supply of hostel accommodation services. 4. Admissibility of Certain Questions Under Section 97(2) of the GST Act: The judgment noted that certain questions posed by the applicant did not fall within the scope of Section 97(2) of the GST Act, which outlines the matters on which advance rulings can be sought. As such, no ruling was issued on these questions. Ruling: - The hostel accommodation services provided by the applicant are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). - 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 as part of a composite service is taxable at 18%. - No ruling was issued for questions outside the scope of Section 97(2) of the GST Act.
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