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2023 (9) TMI 1577 - 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 exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) for hostel accommodation. 2. Requirement for GST registration for the applicant. 3. Applicable tariff heading and tax rate for hostel accommodation services. 4. Taxability of in-house food supply to hostel inmates as a composite supply. 5. Admissibility of a question under Section 97(2) of the GST Act. Issue-wise Detailed Analysis: 1. Eligibility for 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 clarified that the term "residential dwelling" is not defined under the CGST Act, but in trade parlance, it refers to a place where people reside as a home, excluding places meant for temporary stay like hotels or hostels. The ruling emphasized that hostels provide temporary lodging and are not equivalent to residential dwellings. The applicant's hostel, being a commercial establishment with additional services like food and housekeeping, does not qualify for the exemption. 2. Requirement for GST Registration: The judgment stated that the applicant is required to register under GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. The provision of hostel accommodation services constitutes a taxable supply under Section 7(1)(a) of the CGST Act, making registration mandatory if the turnover threshold is crossed. 3. Applicable Tariff Heading and Tax Rate: The services provided by the applicant fall under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The ruling specified that hostel accommodation services are taxable at 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, as amended. The judgment differentiated hostel services from hotel accommodations, emphasizing that hostels are for longer stays with basic facilities, unlike hotels. 4. Taxability of In-house Food Supply: The supply of in-house food to hostel inmates is considered part of a composite supply, where the principal supply is hostel accommodation. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply applies to the entire composite supply. Thus, the composite supply, including food services, is taxable at 18%, aligning with the tax rate for hostel accommodation. 5. Admissibility of a Question: The judgment noted that the fifth question raised by the applicant does not fall within the scope of Section 97(2) of the GST Act, and therefore, no ruling was issued on that question. The section outlines the specific questions on which advance rulings can be sought, and the applicant's question did not meet these criteria. Ruling Summary: - The applicant's hostel accommodation services are not exempt under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). - Registration under GST is required if the turnover exceeds twenty lakh rupees. - Hostel accommodation services are taxable at 18% (9% CGST + 9% SGST). - In-house food supply is part of a composite supply taxable at 18%. - No ruling on the fifth question due to its inadmissibility under Section 97(2) of the GST Act.
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